Maxine Waters:<p><i>When we buy up this toxic paper, we're in charge. We can do the kind of loan modifications we've been urging [the industry coalition]...</i><p>Here's a clip of Maxine:<p><a href="http://www.youtube.com/watch?v=KN6s1KVFBNg" rel="nofollow">http://www.youtube.com/watch?v=KN6s1KVFBNg</a><p>...she is making a threat to nationalize the oil industry, but flubs the word. The reporters basically laugh at her, and compare her to Hugo Chavez. Guess what? The imbecile wasn't that far off...<p>We have no real conception of how screwed we are, but we know one thing: The credit market is now fully subject to political constraints. To what degree is hard to say. But congress has already been forcing banks to give loans to unqualified people (a big part of the original problem) and so the same practice will likely continue. Except, banks know full well that every bad loan can be sold to the taxpayer at full price.<p>An unbelievable coup.
My $0.02<p>The Good:<p>A non trivial part of the market freeze was due to the uncertainty about the bailout. Will it pass and if so at exactly what price will the Feds buy the toxic junk.
Rather then sell, people were waiting. Perhaps now things can start moving again.<p>So this may be better then doing nothing.<p>The Bad:<p>The may be worse then doing nothing. We may spend a whole lot of money and not make a profit on it. Steal (by inflation) from all the people who save, to give to the bankers, and the bankers could still fail.<p>Many experts argue a better alternative would have been to pick a few winners re-capitalize them and then let everyone else fail. The core issue here is solvency not liquidity, the bailout addresses liquidity, which many consider just a symptom, not the disease.<p>More may have to be done, like re-capitalization, yet more may not be done because while this time there are no pitch forks in DC, there may well be next time. And thus, this could be worse the doing nothing.<p>'Ain't economics fun.
If I may paraphrase a Redditor...<p><pre><code> "So is this good or bad for the economy?
Bubble: bigger
Collapse: inevitable
Distance to fall: farther
Dollar: worthless"</code></pre>
What's the main difference between this bill and the one that was rejected last week? Is it just the pork offerings including a tax credit for racetrack owners and makers of wooden toy arrows?
I thought this bill was the worst idea ever, until I heard Warren Buffett speak up for it two days ago. Buffett has both integrity and economic skills, and he probably understands this proposal better than any of us.<p>For instance, <a href="http://ph.news.yahoo.com/rtrs/20080924/tbs-buffett-bailout-7318940.html" rel="nofollow">http://ph.news.yahoo.com/rtrs/20080924/tbs-buffett-bailout-7...</a><p>The US government has a pretty poor track record for "emergency proposals" and other decisions these last 8 years, so I understand the skepticism. I'd vote against it myself. But there's more to the story than what you hear in most inflamed internet postings. Buffett himself says that we eventually need to roll some heads, but that it shouldn't be our first priority.<p><pre><code> They shouldn't buy them at what they're carrying, what the carrying value is, necessarily.
They should buy them at the kind of prices that are available in the market.
People who are buying these instruments in the market are expecting to make
15 to 20 percent on those instruments. If the government makes anything over its
cost of borrowing, this deal will come out with a profit. And I would bet it will come out with
a profit, actually...</code></pre>
And I thought the democrats were the good guys... Now I really don't know whom to vote for. Wall St will get rich, but the political system has gone bankrupt.
We will know in about what, 4 weeks, whether this actually did what Paulson claimed it would do. If not, then all we did was line Goldman Sach's and others pockets...