Mother Of All Bailouts (MOAB)

Bush gave his speech tonight, but I have been reading up on the issue and it no longer seems the nightmare it did a few days ago.

Basically, it’s not $700 Billion immediately going into bad loans, but rather that is the maximum allowed to buy up defaulted loans on real estate. The government can buy these loans at pennies on the dollar and then resell the properties at a profit later on when the markets stabilize. What’s being created is a fund that will dole the cash on a need basis. And there will be oversight and protections added, which they are ironing out now.

The reason the markets crashed they way they did was partially due to the accounting practices the government foisted on banks after the S&L bailout of the 80s. But that bail out turned into profit for the government. Bailouts aren’t always losers. They often turn out favorable.This may too.

But it is scary and disturbing to be told that the whole system could collapse if nothing is done. And indeed, the credit markets are all but crashed. Without them, the economy we knew will be gone. The US spends on credit a great deal to operate.

I suspect this may be the solution, even though it’s an imperfect one. I prefer the Gingrich plan, but it looks like this one will be rammed through by Monday.

What do you think?

I think if it was worth doing, the private sector would be doing it.
I bet the new government department set up to handle this NEVER goes away.  And it will find things to do.  God help us all.
We will never see the end of bailouts until we dig in our feet and tell companies to suck it up and take the losses.  “Oh, but it will be hard on the economy!”  Uh-huh.  As if ripping 700billion out of the taxpayer’s pockets won’t hurt the economy.  I say it’s broccoli, and I say it stinks. 
If we keep bailing industries out, it rewards foolish behavior.  I believe that’s a bad thing, even if the feds do not.

Posted by  on  09/25  at  12:27 AM

I agree that the government tends to create departments which never go away, and often the solutions they make are worse than the cure like Sarbanes-Oxley. However, in this case, the problem stems from an accounting practice the government forced on financial institutions in the S&L;bail out that renders their defaulted loans worthless due to no one willing to buy them, and therefore it destroys their net worth, making them insolvent. More government interference has the potenmtial to do even more damage. You’re right.

But the government created the mess in the first place. They are responsible in many ways for this happening. It’s not just because these companies are “greedy”. The government told them to make these bad loans. And now they are eating it.

The whole thing stinks to high heaven, but it’s not as simple as us throwing in 700 billion overnight. That’s not how it works. The existence of this bailout could restore market confidence and then we could see a rebound. Real estate will bounce back eventually and the government will make their money back.

Posted by  on  09/25  at  11:40 AM

GOP conservatives present rescue alternative
http://www.gopusa.com/news/2008/september/0926_house_consv.shtml

Posted by BrockTownsend  on  09/26  at  08:33 AM

Sigh of relief, that the bill is passed. the job cuts news and overall uncertainty should reduce now, as DOW shows. As the bill looks like to support business owners, encouraging more recruitment. Lets see whats the long term effect is going to be..

Posted by iva  on  10/03  at  12:19 PM

“as DOW shows” ?

The market was up quite a bit this morning, but evidently sold off when the news came out.  So much for second guessing the market. Gold down slightly, as well as the dollar. I guess everyone thinks it was a bad move.

Indices   Currencies   World
                   
Name       Chg   % Chg   Last
DJIA   EOD       -157.47   -1.50%    10325.38
S&P;500       -15.05   -1.35%    1099.23
NASDAQ       -29.33   -1.48%    1947.39
RUSS2KG       -9.77   -2.96%    320.14
10yr Trsy       -0.02   -0.05%    36.44
Name  
  Chg   % Chg   Last
DJIA       -91.99   -0.88%    10390.86
S&P;500       -9.70   -0.87%    1104.58
NASDAQ       -18.27   -0.92%    1958.45
RUSS2KG       -7.13   -2.16%    322.78
10yr Trsy       -0.02   -0.05%    36.44

$USDEUR       -0.000131   -0.02%    0.724244

   
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__________________

Posted by BrockTownsend  on  10/03  at  12:56 PM

I hope it helps, but they say it will be months before they dole it out, which will be too late for many businesses and families.

Posted by  on  10/03  at  10:50 PM
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