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The Nuts and Bolts of the 700B Congressional Bailout

Downwiththefoe

Downwiththefoe

Well-known member
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I think there is a lot of confusion and a lot of bad information, partisan politics, and just plain bad journalism on this subject of a bailout...I have heard all kinds of crap on the subject that I am pretty sure is not true.

I know this much, I don't think "W" getting on the tube is the answer...but I sure as hell don't trust the MSM and the talking heads in D.C. to give me a the straight truth either especially in this charged political season.


Here is a good article that breaks it down in pretty easy language.


FT Times Article: Bernanke squares virtuous circle
 
Following are some more good articles on the subject, including a question from John Tester. I know it's a lot of reading, but well worth it. But if it's too much, perhaps you can read Sarah Palin's fried Moose Ball recipe on RachelRay.com. (link not provided you lazy bastards)

To further Tester's point, Paulson himself benefited from huge bonuses and the sale of company stock upon leaving Goldman Sachs. And, according to one of the articles stated six months ago that "our banks and investment banks are strong." His justification for penalizing CEO's and their compensation would be that they may balk at accepting the buyout even at the expense or potential demise of their own company.

How can a guy, so closely associated with the troubled industry and who apparently was unaware of the problems (my brother in-law who simply manages his own investments predicted this scenario last year) be trusted to fix it?

http://www.salon.com/tech/htww/

Tuesday, Sept. 23, 2008 12:06 PDT
Jon Tester asks a good question
No wonder grass-roots Democrats like this guy:

Montana Sen. Jon Tester, to Paulson, Bernanke, SEC chairman Christopher Cox, and Federal Housing Finance Agency director James Lockhart:


I'm a dirt farmer. You guys have been in the business -- the former chairman of Goldman Sachs.

Why do we have one week to determine $700 billion that has to be appropriated, or this country's financial systems go down the pipes?

Wasn't there some opportunity sometime down the line where we could have been informed of how serious this crisis was so we could take some preventative steps before this got to this point?


Perhaps back in the spring of 2007, say, when Paulson and Bernanke were telling us that the subprime problem was "contained"?
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Conflict Of Interest? Report Says Goldman Sachs ‘Among Biggest Beneficiaries’ Of Paulson’s Bailout»
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In making his push to administer the largest federal bailout of Wall Street in history, Treasury Secretary Henry Paulson is seeking unfettered authority. McClatchy poses the question today, “can you trust a Wall Street veteran with a Wall Street bailout?,” referring to Paulson, the former CEO of Goldman Sachs:

But the conflicts are also visible. Paulson has surrounded himself with former Goldman executives as he tries to navigate the domino-like collapse of several parts of the global financial market. And others have gone off to lead companies that could be among those that receive a bailout.

In late July, Paulson tapped Ken Wilson, one of Goldman’s most senior executives, to join him as an adviser on what to about problems in the U.S. and global banking sector. Paulson’s former assistant secretary, Robert Steel, left in July to become head of Wachovia, the Charlotte-based bank that has hundreds of millions of troubled mortgage loans on its books.

Goldman Sachs cashed in under Paulson, with earnings in 2005 of $5.6 billion; Paulson made more than $38 million that year. A 2005 annual report shows that “Goldman was still a significant player” in issuing mortgage bonds. The conflict of interest is increasingly clear today, as Bloomberg reports that “Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries” of Paulson’s bailout plan:

Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

“Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,” Jeffrey Rosenberg, Bank of America’s head of credit strategy research, wrote in a report today, without identifying particular investment banks.”

The conflict of interest provides all the more reason for the bailout legislation in Congress to have more stringent oversight that the administration opposes.

The Wonk Room notes six months ago, Paulson claimed, “our banks and investment banks, are strong.”
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http://www.ajc.com/blogs/content/shared-blogs/ajc/bookman/entries/2008/09/24/paulson_plan
 
So.... where are all you "redistribution of wealth" shitheads now??? You don't want to give it to the poor... no they have to earn it!! So, lets just give it to the rich, they already paid their dues!! KMA And with McCain... we get more of the same... I'm not saying Obama is the answer, but McCain isn't even answering the phone, along with the Bimbette he picked
 
September 22, 2008
Bush To Put FEMA in Charge of Wall Street Rescue
President Bush compounded widespread concern about a domestic economy on the verge of collapse today when he announced that FEMA would coordinate the 700 billion dollar bailout of Wall Street.

"We have our best people on it," Bush insisted, causing the market to slide two thousand points late this morning. Bush and his staff expressed surprise that Adminstration assurances have done little to buoy confidence in the economy. "None of the folks in charge of the bailout ever worked with horses or anything," said a perplexed White House staffer.

Circumstances on Wall Street remained dire today. Thousands of traders and bankers have been without money, gold ingots, or economic power for almost a week now, and conditions in hastily constructed "trailer banks" have been horrible. "There are hardly any bathroom attendants here at all," complained one temporary resident, Preston Brunswick III, a complex derivatives trader who "barely cleared a million" last year.

Compounding the crisis, trucks full of relief money have been mysteriously stalled in Alabama, and FEMA officials were at a loss to explain why it was so hard to get the "Benjamins" to New York, where they are so desperately needed.

"We need that money now! We're barely able to expense out our lunches," exclaimed worried A.I.G. executive Gwen Driscoll. Driscoll fretted that her corporate American Express Platinum card was "being strained to the breaking point."

Meanwhile, Republicans warned that the allegedly Democratic-controlled Congress would take too much time debating a relief bill. "We need a lack of oversight, and we need it now," said Treasury Secretary Henry Paulson. "Before anyone has a chance to think about it."

Posted by Tom Burka at 01:46 PM in News
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Sorry to scare you like that.
 
TheBud said:
September 22, 2008
Bush To Put FEMA in Charge of Wall Street Rescue
President Bush compounded widespread concern about a domestic economy on the verge of collapse today when he announced that FEMA would coordinate the 700 billion dollar bailout of Wall Street.

"We have our best people on it," Bush insisted, causing the market to slide two thousand points late this morning. Bush and his staff expressed surprise that Adminstration assurances have done little to buoy confidence in the economy. "None of the folks in charge of the bailout ever worked with horses or anything," said a perplexed White House staffer.

Circumstances on Wall Street remained dire today. Thousands of traders and bankers have been without money, gold ingots, or economic power for almost a week now, and conditions in hastily constructed "trailer banks" have been horrible. "There are hardly any bathroom attendants here at all," complained one temporary resident, Preston Brunswick III, a complex derivatives trader who "barely cleared a million" last year.

Compounding the crisis, trucks full of relief money have been mysteriously stalled in Alabama, and FEMA officials were at a loss to explain why it was so hard to get the "Benjamins" to New York, where they are so desperately needed.

"We need that money now! We're barely able to expense out our lunches," exclaimed worried A.I.G. executive Gwen Driscoll. Driscoll fretted that her corporate American Express Platinum card was "being strained to the breaking point."

Meanwhile, Republicans warned that the allegedly Democratic-controlled Congress would take too much time debating a relief bill. "We need a lack of oversight, and we need it now," said Treasury Secretary Henry Paulson. "Before anyone has a chance to think about it."

Posted by Tom Burka at 01:46 PM in News
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Sorry to scare you like that.
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That's too funny, Bud. Fema didn't even get to be the point agency on Ike.
 
kalm said:
How can a guy, so closely associated with the troubled industry and who apparently was unaware of the problems (my brother in-law who simply manages his own investments predicted this scenario last year) be trusted to fix it?
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A couple points:

1. First -- I am sympathetic to your point about "how can a Wall Street insider be trusted to fix the system," but what's the alternative? Our capital markets are complex institutions, and the people who solve this mess will have to be people who have working knowledge of them.

2. Out of curiousity -- when you say that your brother-in-law predicted "this scenario" last year, what exactly did he predict? If you're saying that he predicted that too much consumer debt and loose lending standards by financial institutions were going to cause increased mortgage defaults and losses by banks, then I believe you -- a lot of people predicted that. But if, when you say he predicted "this scenario," you mean he predicted that Bear Stearns, Fannie/Freddie, Lehman Brothers, and Merrill Lynch would all fail in 2008, that Goldman Sachs and Morgan Stanley would become regulated banks, and that our financial markets would reach the brink of a complete meltdown -- then I'm calling b/s. My point is, while a lot of people knew or suspected that there was a bubble due to excessive consumer debt, I don't think anyone really knew enough to have predicted the extent of the damage that has been done.

Personally -- if you would have told me at the beginning of this year that either: 1) all of the above financial institutions were going to fail, or 2) we were going to have another 9/11-type event, I would have thought the 9-11 event much more likely.
 
DWTF and I have exchanged PM's for the last 2 years about what was coming, and now it is here. Do not fool yourself into believing this $700 B I L L I O N BAILOUT is the end of it. Estimates of the true number run as high as 5 TRILLION.

Why are the people on the oversight committee not being called on the carpet? How many of you on eithe side of the aisle even know their names? Who received the biggest payoffs from Freddie Mac and fannie Mae? Follow the MONEY! Why should ANY upper level executive at these companies still be emplyed, or in jail ? Why should any bailout not specifically exclude Golden Parachutes? The list goes on and on, but heads should roll. Sarbanes-Oxley was signed into law in 2002. BAC, help us out here, wasn't SOX put into place to prevent this type of thing? There is supposed to be Auditor Indepedence is there not? SR Executives are supposed to have individual responsibility are they not? Conflicts of interest are supposed to be covered right? SOX gives the SEC unprecedented power I thought. Get us up to speed if you would. This is a collosal cluster.fuck imo. :rant:
 
Grizlaw said:
kalm said:
How can a guy, so closely associated with the troubled industry and who apparently was unaware of the problems (my brother in-law who simply manages his own investments predicted this scenario last year) be trusted to fix it?
Click to expand...

A couple points:

1. First -- I am sympathetic to your point about "how can a Wall Street insider be trusted to fix the system," but what's the alternative? Our capital markets are complex institutions, and the people who solve this mess will have to be people who have working knowledge of them.

2. Out of curiousity -- when you say that your brother-in-law predicted "this scenario" last year, what exactly did he predict? If you're saying that he predicted that too much consumer debt and loose lending standards by financial institutions were going to cause increased mortgage defaults and losses by banks, then I believe you -- a lot of people predicted that. But if, when you say he predicted "this scenario," you mean he predicted that Bear Stearns, Fannie/Freddie, Lehman Brothers, and Merrill Lynch would all fail in 2008, that Goldman Sachs and Morgan Stanley would become regulated banks, and that our financial markets would reach the brink of a complete meltdown -- then I'm calling b/s. My point is, while a lot of people knew or suspected that there was a bubble due to excessive consumer debt, I don't think anyone really knew enough to have predicted the extent of the damage that has been done.

Personally -- if you would have told me at the beginning of this year that either: 1) all of the above financial institutions were going to fail, or 2) we were going to have another 9/11-type event, I would have thought the 9-11 event much more likely.
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You're right, the treasury secretary has to be someone completely familiar with the system, so it's a catch 22. But going forward, I'm not sure that the guy who himself received a golden parachute and hefty severance after divesting himself of Goldman-Sachs out of conflict of interest should be the one in control of a 700 billion dollar buy-out, especially when he's suggesting that we need to leave CEO compensation off the table. He may not have caused this, but he presided over the fall and would seem to be part of the problem.

My brother in-law didn't predict the exact scenario, but he was aware of some of the financial institutions involved. Of course there was no way of knowing how the government would react, or if circumstances might have turned around and things might have improved.

He told me that the bubble was bursting in the real-estate market, that consumer debt and bad lending practices were compounding the problem, and that several large financial institutions were in bad shape because too much of their wealth was on paper only and they had become over-extended. He went on to say that since we went off the gold standard the health of the US economy is only as strong as the worldwide condidence in it. Again backed by paper. He felt the combination of these factors, including our avaricious borrowing, could send the US economy into a tailspin if a couple of these companies fell.

By the time we spoke of this (last fall) he had already dumped 13 rental properteries, and was reinvesting in commodities like gold, a vineyard, and looking at overseas real-estate.

He has an economics background, retired in his mid 30's, and now spends thousands of dollars on financial newsletters and seminars to help him manage his family's portfolio. He's obviously clever with finance and apparently gets some solid information, but I don't think he was the only one who saw this coming.
 
[
quote="Grizbacker1"]DWTF and I have exchanged PM's for the last 2 years about what was coming, and now it is here. Do not fool yourself into believing this $700 B I L L I O N BAILOUT is the end of it. Estimates of the true number run as high as 5 TRILLION.

Why are the people on the oversight committee not being called on the carpet? How many of you on eithe side of the aisle even know their names? Who received the biggest payoffs from Freddie Mac and fannie Mae? Follow the MONEY! Why should ANY upper level executive at these companies still be emplyed, or in jail ? Why should any bailout not specifically exclude Golden Parachutes? The list goes on and on, but heads should roll. Sarbanes-Oxley was signed into law in 2002. BAC, help us out here, wasn't SOX put into place to prevent this type of thing? There is supposed to be Auditor Indepedence is there not? SR Executives are supposed to have individual responsibility are they not? Conflicts of interest are supposed to be covered right? SOX gives the SEC unprecedented power I thought. Get us up to speed if you would. This is a collosal cluster.f**k imo. :rant:
Click to expand...
[/quote]

I hereby appoint Backer head of the SEC. Nothing like a few STFU's to whip these CEO's and congressional oversight committees into shape, plus unlike the Bush administration, we could be assured that no nude statues would be covered up.

Good post.
 
Grizbacker1 said:
BAC, help us out here, wasn't SOX put into place to prevent this type of thing? There is supposed to be Auditor Indepedence is there not? SR Executives are supposed to have individual responsibility are they not? Conflicts of interest are supposed to be covered right? SOX gives the SEC unprecedented power I thought. Get us up to speed if you would. This is a collosal cluster.f**k imo. :rant:
Click to expand...

Sarbox does nothing in this area ... it is constructed to prevent fraud and to strengthen internal controls to further assure that the financial statements are presented accurately. It doesn't appear that any of these banks actually committed fraud (unlike, say, Enron). Everybody had access to their true and accurate financials (Fannie had some reporting issues a few years ago, but that wasn't the cause of this crisis), and there wasn't a problem with the reporting of that information.

The problem here was that firms were leveraged too far, so when their investments took a hit, they were suddenly no longer liquid (and were suddenly huge investment risks for anyone else, so they couldn't raise any capital).

That's not really an SEC issue (as they can't enforce laws that don't exist) ... that's a matter of (depending on your perspective) the government not requiring stronger debt ratios for the banks or the banks simply making really bad decisions (or both).
 
Bay Area Cat said:
Sarbox does nothing in this area ... it is constructed to prevent fraud and to strengthen internal controls to further assure that the financial statements are presented accurately. It doesn't appear that any of these banks actually committed fraud (unlike, say, Enron). Everybody had access to their true and accurate financials (Fannie had some reporting issues a few years ago, but that wasn't the cause of this crisis), and there wasn't a problem with the reporting of that information.

The problem here was that firms were leveraged too far, so when their investments took a hit, they were suddenly no longer liquid (and were suddenly huge investment risks for anyone else, so they couldn't raise any capital).

That's not really an SEC issue (as they can't enforce laws that don't exist) ... that's a matter of (depending on your perspective) the government not requiring stronger debt ratios for the banks or the banks simply making really bad decisions (or both).
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So this amounts to some poor investment decisions by these F.I.'s, getting in over their heads, investments involve risks etc. And the only prevention would be to go back regulation of the insurance and mortgage lending industries (and perhaps credit card industry) to restrict or prevent them from dabbling in the market. Again, if a company becomes so large that we can't afford to not bail it out, can we really afford to allow it to get that big in the first place?
 
That kind of seems to be the issue ... it's one thing when a company makes a bunch of bad decisions and fails, letting down their investors and employees, but these companies are so large, and so many other companies are dependent upon them as holders of their bonds and other investment instruments, that we apparently really can't afford to let them suffer alone for their mistakes. Their mistakes are large enough to essentially bring down our entire economy.

I don't know what the perfect answer is, but I do suspect that a whole lot of smart regulations are going to be necessary for this industry, perhaps including some that prevent any one company from being in a position to bring down our economy.

By the way ... where's ronbo? ;)
 
Bay Area Cat said:
That kind of seems to be the issue ... it's one thing when a company makes a bunch of bad decisions and fails, letting down their investors and employees, but these companies are so large, and so many other companies are dependent upon them as holders of their bonds and other investment instruments, that we apparently really can't afford to let them suffer alone for their mistakes. Their mistakes are large enough to essentially bring down our entire economy.

I don't know what the perfect answer is, but I do suspect that a whole lot of smart regulations are going to be necessary for this industry, perhaps including some that prevent any one company from being in a position to bring down our economy.

By the way ... where's ronbo? ;)
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Funny, I wondered the same thing. Probably licking his wounds, then licking his chops at all the opportunities in the near future. Buy low you know.
 
kalm said:
Bay Area Cat said:
That kind of seems to be the issue ... it's one thing when a company makes a bunch of bad decisions and fails, letting down their investors and employees, but these companies are so large, and so many other companies are dependent upon them as holders of their bonds and other investment instruments, that we apparently really can't afford to let them suffer alone for their mistakes. Their mistakes are large enough to essentially bring down our entire economy.

I don't know what the perfect answer is, but I do suspect that a whole lot of smart regulations are going to be necessary for this industry, perhaps including some that prevent any one company from being in a position to bring down our economy.

By the way ... where's ronbo? ;)
Click to expand...
Click to expand...

Funny, I wondered the same thing. Probably licking his wounds, then licking his chops at all the opportunities in the near future. Buy low you know.
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I'm picturing the Knight from "Holy Grail," missing all of his arms and legs, screaming "It's just a flesh wound" and "buying opportunity!" :)
 
A very good article from our friends to the North.

Will Conservatives Embrace Socialism


Read some of the links- good stuff.

Even the Canadians think it drags us into socialism...and does not really fix the underlying problem.

It's like putting a band-aid on a triage unit in the middle of a firefight.


Leave it to DC Politics to fugg up a wet dream.

Remember this date if it passes- in 50 years we will still be paying for it big time. (historical and financial)

Where will they get the votes- Ron Paul says they do not have the votes..how will they pass it if not?

Martial Law?
 
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