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PostSubject: Bailout Bill   Sun Sep 28, 2008 6:14 pm

Draft of Bailout Bill: http://i.cdn.turner.com/cnn/2008/images/09/28/ayo08c04_xml.pdf

I figured this was important enough to warrant its own topic. It doesn't seem like a complete train wreck, but I have a lot of concerns. I will post them as I'm reading through.


Title 1, Sec. 110, Page 28, lines 13 - 18
Quote :
(2) MODIFICATIONS.—In the case of a residen
14 tial mortgage loan, modifications made under para
15 graph (1) may include—
16 (A) reduction in interest rates;
17 (B) reduction of loan principal; and
18 (C) other similar modifications.

What the hell? Reduction of loan principal? Seriously?



I'm not real thrilled with the compensation hard points either. It could stand to be a hell of a lot more stringent.

And of course, let's not forget that the Secretary of Treasury will be running the country financially. Buy hey, at least he reports to Congress every 90 days.



Well, this is something of a relief:

Title 1, Sec 113, Page 36, lines 7 -
Quote :
7 (2) TERMS AND CONDITIONS.—The terms and
8 conditions of any warrant or senior debt instrument
9 required under paragraph (1) shall meet the fol
10lowing requirements:
11 (A) PURPOSES.—Such terms and condi12
tions shall, at a minimum, be designed—
13 (i) to provide for reasonable participa
14 tion by the Secretary, for the benefit of
15 taxpayers, in equity appreciation in the
16 case of a warrant, or a reasonable interest
17 rate premium, in the case of a debt instru
18 ment; and

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PostSubject: Re: Bailout Bill   Sun Sep 28, 2008 9:54 pm

I'm curious to know how this is going to impact the fiscal plans for Obama/McCain's first terms (do they have to throw it all away, or is this a separate budget, or what). Also, I think a lot of interest may be placed in the next few days on potential Treasury Secretaries.
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Damacus

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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 12:05 am

I think they should say fuck it and let homeless people devise our financial plans
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 12:16 pm

The vote just failed to pass by a pretty sizable margin in the House... the DOW is down ~600 for the day. I'm not really an economics buff but is it fair to say incoming Great Depression II?

Again, I don't know the whole situation but as I understand it the crisis is about Wall Street institutions (banks mainly) that own a lot of bad mortgage debt (ARMs and the like that have skyrocketing monthly payments and people are having a hard time paying the rising costs and are defaulting). So Bush/Paulson want the government to buy $700 billion (up to $350 billion now and potentially $350 billion later) of that debt and then reinvest it as the markets recover (interest rates should go down so people can keep the mortgages and the govt makes a profit off of the loans over time), and then return that profit to the taxpayers.

What I don't understand is how it impacts taxpayers in the short run. Do we automatically pay higher taxes for it next year? I assume we borrow the money from more foreign banks to actually buy the assets, but I don't really understand how it impacts people in the next fiscal year.

Basically, the major downside I see here is that stock accounts will tank badly (not sure how this impacts 401K retirement accounts) and a lot of institutions will fail in the short term. But if we just let them all fail, what happens next? Most people will get their money out of the banks or if the banks fail, from the government up to 100,000 (FDIC). Yeah some people, especially those invested heavily in the market, will really suffer, but how does Joe the average American suffer from either a bailout or lack thereof?


Last edited by Peanutbutter on Mon Sep 29, 2008 12:24 pm; edited 1 time in total
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 12:18 pm

Fuck it, I'm selling my house, cars and property and buying gold bars.
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 12:27 pm

Oh, and probably the $700 billion question, what chance does McCain have, short of a miraculous debate performance, when Obama is clearly seen as the better figure to handle the economy?
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 12:37 pm

He could always ask his VP to write down her non-sequitur jumble of loosely economic-related sentence fragments. Seemed to work for Couric.
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 1:06 pm

Round one to Congress!
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 2:03 pm

http://news.yahoo.com/s/ap/20080929/ap_on_bi_ge/financial_meltdown_1543

Good game guys, it was nice knowing you all

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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 2:08 pm

I love how McFailure came into town dramatically to lead the Republican charge into supporting the bill and they overwhelmingly told him to talk to the hand. The current chatter is that if McCain wanted to claim partial credit for passage of the bill, shouldn't he similarly be forced to accept partial blame for his failure to get it to pass?

Politico article on the topic.
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 7:06 pm



Disappointed Bush is Disappointed
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 7:47 pm

Reminds me of another picture chronicling his historic presidency.

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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 7:54 pm

"Why does everyone hate me?" - Bush
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PostSubject: Re: Bailout Bill   Mon Sep 29, 2008 11:55 pm

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PostSubject: Re: Bailout Bill   Tue Sep 30, 2008 4:57 am

There's a money crisis?


/goes back to swim in his Scrooge McDuck gold vault.
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PostSubject: Re: Bailout Bill   Tue Sep 30, 2008 5:00 am

PB. The issue is not that rates are rising and asset prices are tanking per se. If those things were occuring as a reaction to real fundamental events, they would be an optimal response and there would be nothing the government could do to improve the situation (in the aggregate I mean. At the individual level the govt can always provide special favors for the few at the expense of the many).

The issue is the cause of that dynamic. In this case, there is nothing real causing the business cycle -- there is no capacity constraint of production, no oil shock, no crop shortage. Fundamentally the issue in financial markets right now is one of information. For a variety of reasons people do not know how to price risk. That is to say, the housing crash (due to the financially market structure that exists) created an unprecedented amount of uncertainty. Institutions don't know if they can trust each other.

A specific example of an information issue, which illustrates more what I mean, is one of signalling. It's essentially a classic lemons problem. If we have a bunch of banks, many of which are suspected to be insolvent, the solvent banks dont want to send behavioral signals out that will make them look insolvent. For example if you take on a bunch of new debt it appears that you are trying to shore up your balance sheet. Fundamentally lenders don't and can't know if they are lending into a ponzi scheme or into a solvent instutition. This means that even solvent banks are having a hard time getting money simply because anyone with capital sees anyone who needs money as being highly risky. It's an information and trust issue between institutions. In theory, this particular problem can actually be solved fairly easily. Get rid of the signaling issue. Basically, the gov't mandates that all banks must raise X% of their balance sheet worth of new capital. Since eveyone must do it, there's no signal, and everyone can start trading again. Unfortunately, that is not Paulson's plan.

Right now, it is not so much an issue of creating an optimal policy. Politics get in the way. There's a trade off between time and policy due to the friction of politics. Although I would love to see a perfect policy which uses a variety of tools to solve the issues at hand, we truly cannot wait. Right now the problem is containted so to speak, but the fact of the matter is that if things keep going in the direction that they are, we can have a seriour debt-deflation spiral. For example, most companies pay their employees at the end of the month. Many of these financial instutitions literally wont be able to pay their employees if they can't get new capital. They lose their jobs, meaning they buy less stuff, meaning other people lost their jobs... etc.

It would be a serious social mistake to block the bail out. The cost to the overall economy dwarfs the huge cost of the bailout. I haven't done a very good job explaining here, and I can give you some good reading if you'd like (a good starting point is this blog: economistsview.typepad.com. Ther author, Mark Thoma, is very good about keeping links to current discussions of policy issues.). I need to run now, unfortunately my apartment is without internet, so I'm only able to post while I'm on campus (for now).
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PostSubject: Re: Bailout Bill   Tue Sep 30, 2008 10:11 am

Not to go off topic much, but it looks like uncomfortably close to each others lips pictures aren't just for the GOP anymore


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PostSubject: Re: Bailout Bill   Tue Sep 30, 2008 3:49 pm

Primary wrote:
WHEN A MAN LOVES....another man?

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PostSubject: Re: Bailout Bill   Wed Oct 01, 2008 11:52 pm

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