Is It Really a "Wall Street Bailout?"

[...] September 22nd I detailed my reasons why this is not just a “Wall Street bailout.”     That many [...]

[...] 22, 2008 by Eagle1 Republicans absolutely love government bailouts, provided they only apply to large corporations and come “clean” which generally means, [...]

the politicians and the US money making machine have been in bed together throughout the administration of both Bushes. Now the chickens come to roost. They frightened us into a war on terrorisim, that was only a ploy of the texas oil barrons and the Bushes. Now they are trying to scare us into giving them whats left of our savings and our future. Dont allow this scam to go on. Lets get rid of all those that have served in wahington the past 8 years. A big change is in order. these thiefs need to be in jail, not on capital hill. lets start an investigation into the personal wealth of our leaders, and let them pay for the mess they caused. our politicians dont represent the people they are elected to serve. most of us cant make it ti the end of the month.

When will someone from Citi finally go to jail? First Citi facilitated accounting fraud for Enron, then helped WorldCom cover their tracks in return for stock, and now they hold tons of predatory and fraudulantly originated mortgage backed securities that are dragging down the entire market. Meanwhile Citi still refuses to mark their MBS's down to proper market value, their CDO's are still priced at 40% of what Merill was forced to sell theirs off for, and citi refuses to help facilitate a solution by modifying the rates of these obscene adjustable mortgage rates down to something that is even close to market value. Let's not forget the estimated 80+ billion of debt that isn't even on Citi's books at the moment (in typical Enron fashion). Let Citi fail and send Vikram to jail.

This article is wrong on so many levels it's hilarious. Fannie/Freddie aren't solely responsible for this mess. There was malfeasance throughout all of wall street. Financial engineers created new types of securities (mortgage backed securities, CDO's, etc...) as another financial instrument to buy and sell. The real estate bubble just fueled the unregulated sale of these types of securities. It was all predicated on the idea that real estate would never go down in price. It's not just stupid homeowners who bought the arms, it's the lenders that said "your house will always go up in value, therefore buy this arm loan now and refinance before the rate resets". Sure it's your fault if you got in a bad loan, but when your loan officer, real estate agent, and the ENTIRE MAINSTREAM MEDIA for years tell you that it's practically impossible for real estate to go down in price, well then it's hard not to believe them. The resulting bubble burst, and unsurprisingly people can't afford to live in the house that they bought, and they can't refinance because their home has lost value, and all this "toxic debt" is in the end tied to that simple fact. It's not the debtors fault that all this happened. The defaulters didn't engineer financial instruments so complex that even warren buffet doesn't understand them. The defaulters didn't have the ratings agencies give these securities A or higher ratings when they really weren't. The defaulters didn't make hundreds of billions of dollars in the last few years off of these securities that turn out to be worthless in the long term. I'm sick of the whole "this is fannie/freddie's fault, and the community reinvestment act's" fault nonsense. While fannie/freddie had a small hand in the whole debacle, the CRA has hardly anything to do with this at all. The CRA doesn't force banks to make bad loans, it merely says that it's illegal to deny a loan based on area code. That's all it says, really, go read it. If you look at the amount of loans that defaulted that are in any way tied to the CRA provisions, it's a pretty small percentage. There's more alt-a loans that defaulted than anything that had to do with the CRA. Please get your facts right, i'm sick of listening to all the same ol' conservative myths getting regurgitated over and over. So to answer your question of "is this really a wall street bailout?" YES. Ben and paul want a blank check with no oversight whatsoever to buy worthless debt so that banks and other financial institutions don't have to take a loss. While I'm against this whole deal in the first place, there could be ways to make it actually enticing to the taxpayer. Why not make deals with wall street firms like berkshire hathaway just made(here's the deal): • Goldman Sachs pays a fat dividend to Berkshire Hathaway of 10% on $5 Billion dollars -- that's $500 million per year. And, since this is a preferred, it gets paid out of net income in after tax dollars dollars. Ouch. • Goldman gets the right to call the preferred at any time at a 10 percent premium. Ouch again. • Buffett gets $5 billion worth of warrants with a strike price of $115, or about 43.47 million shares. The warrants are good for only 5 years. If we're going to use a ton of taxpayer money, let's not waste it on a bailout, let's make a smart investment. Bernanke and paulson are running the fed like a hedge fund, a badly badly managed hedge fund.

http://www.huffingtonpost.com/2008/09/22/dirty-secret-of-the-bailo_n_128294.html

This whole thing sucks.. I am one who was conned into a bad loan. When you have money to put down and they tell you know you wont get the house.. you have a VA loan to use they say no you wont get the house.. and you need a house to live in what do you do. They told us the only way to get this loan was to do it their way and thier way was not even the loan we agreed to sign. I admit to being mortgage stupid.. I admit to rushing into a home without knowing all the details I thought someone had that stuff watched... I guess I am stupid.. But hey if I am going down like I am.. shouldnt these Banks tumble to?.. I am not looking for a hand out or a savior plan.. I know I can no longer afford my house and I will be darned if I am going to pay more than what I make. I will recover other people in the pass have recovered from forclosures I am not a lone. I can rent I am lucky we still have jobs. But I think socolizem is wrong. I think thinking mostly of wall street and the banks is wrong. If the government is going to save them why not help the millions who are loosing there homes who will be paying taxes too.. You need to all relieze one thing not only are the homeowners in bad loans getting hit hard but we are getting hit double because we are tax payers too. So, Why not let the dominos fall where they must and let us pick are selfs up without hurting the US money anymore than what it has been hurt.. If they where sleeping during the boom.. what makes you think they are going to wake up now....

September 23, 2008 I'm Not Your Sugar Daddy by MrArbitrage Everybody’s looking for a bailout. Now these companies are demonstrating a sense of entitlement. I believe that we the tax-payers should come out ahead if we are going to foot the bill. If we should be the lender of last resort we should make terms that will help these companies survive - but not to our detriment. The elderly have been the most powerful lobby group in the past because they are the people who have historically voted. The elderly have benefited greatly from entitlement programs for many decades as many have taken out far more than they ever put in. Now the Baby Boomers are becoming the elderly and they are beginning to collect Social Security. Because the system is a Ponzi-scheme and Congress has relentlessly raided the ‘trust fund” over the years, they are counting on my generation, generation-X to keep those payments coming. My generation as well as those who follow Gen-X are faced with the knowledge that in order to support the Baby Boomers on Social Security and Medicare, we have to face the fact that we have been working for the past 20 years, paying into this system and will receive nothing in return. Not only that, they are demanding that we continue to work and pay even MORE into it while we KNOW that we are getting the old shaft. That’s supposed to be our civic duty. A great deal of concern has been expressed about the government taking over companies like AIG. The government owning the dominant players in various industries brings about fears of Socialism or Communism. With the AIG proposed bailout, the government would own 80% of the company. The stock has consequently fallen headlong to reflect such a dilution. My thought on the matter is that the government should not retain ownership but rather the new equity for all “bailed out” companies should be placed in “privatized” retirement accounts in custody for generations following the Baby Boom who have been paying into Social Security for a specific number of years. These can be special class B, dividend paying shares with less voting power, leaving the control and operation to the private sector. If companies like GM, Ford & Chrysler need to come to us for a “bail out”; they should be subject to the same terms. Nobody would force them to go to the tax payer. If they hadn’t run their companies imprudently, they wouldn’t have to agree to such terms. This system would keep the government out of the operation of these companies, save jobs and avert a meltdown while helping to solve an enormous problem we are going to be facing in the coming years with Social Security. Any other plan will likely result in the government turning around and selling off valuable assets to Goldman Sachs for pennies on the dollar while the tax-payer gets left with the garbage. This way the only people who lose will be the people who purchased the stocks of these companies, which is fair since that is the inherent risk one takes when investing in equities. That is why we diversify. The same goes for the mortgage bailout. The assumptions are perhaps overly pessimistic as to the number of expected “toxic mortgages”. If the tax-payers are expected to assume the bad mortgages, our elected charlatans need to see to it that the good mortgages in the bunch end up in the custodial accounts as well. These custodial accounts need to be “tamper proof”, meaning that under no circumstance can politicians raid them for their prodigal spending. I expect resistance to such a proposal for the same reason why they resisted “privatizing” Social Security in the first place: In such custodial accounts, Congress cannot plunder them and replace stock with IOU’s. Their specious rhetoric about how “risky” this would be wouldn’t be as effectual because we are already agreeing to take the risk due to the alternative risk of allowing these companies to fail. They couldn’t claim that this is a conspiracy to drive up stock prices through excessive buying because the stocks are falling as a result of share dilution. The beneficiaries would be the people who are going to become the victims after all the Baby Boomers are receiving their Social Security checks. We could use this “rescue plan” as an opportunity to deal with two problems at one time and set in motion a plan for the gradual phasing out of Social Security starting with Generation X. Eventually these companies will come back and command market caps in the hundreds of billions of dollars. Once that happens, the positions in such accounts could be gradually unloaded into the marketplace and replaced with low cost index funds that have historically returned over 10% per year long term without having each beneficiary day trading their accounts, a preposterous notion the opponents of privatization have often propounded in order to maintain the status quo of their unabated plunder. http://www.tableofwisdom.com/MrArbitrage_on_Market_.html

Steal from the poor and give to the rich!!! The bail out is designed to protect their Wall Street buddies. These guys make on average 300k a year, let them suffer for their own mismanagement vs. putting it on the honest working people. These people should be prosecuted vs. bailed out. Where is the oversight, Paulson is one of them, he is a Wall Streeter. Our congressmen and senators are unfortunately are bought off by these guys. I don't buy this bailout plan, life isn't that simple!

Brian, I'm sure you're a nice guy but your reasoning on this bailout of Wall Street bankers = Major FAIL. This is a 'Buy A Yacht' charity for investment bankers, with our tax money.

Why bail out the bad loans, Help the economy by paying off the primary mortgages of the taxpayers who are doing good on there loans, I just don't understand why reward the bad and not the good. It would help out the economy in a great way. So some banks will fail and some will loose their homes. So what, I know what I make and how much I can afford there is no excuse for it. Oh btw I rent I don't even have a mortgage but it will help in the long run......

What is missing here - and in most inquiries - isn't THAT there exists this 'toxic debt' - It's also who created it, and with what intent. I firmly believe it was with intent to distribute. I do my own research but I find it lacking no one even asks -gee, why are we looking at these empty bags of CDO's. Intent to deliver. Crime. It's not a bailout, on any level. It's a laundering scheme. I argue the consumer who bought into one of the ARMS that reset - hmm 7 days from now - five years past ! didn't have to believe the world was ending to take such an arrangement ? I argue CountryWide had to think the world was ending to ISSUE it. OH - it was those pesky homeless people who took the loans CountryWide offered up- that's who did this ? Come on. If you were CountryWide - why ? All of a sudden ? Would you start putting yourself at risk unless you fully intended to unload and launder the loan products you were selling like - well - like body armor suits in the desert !

And This article proves why Fox Business News are a bunch of Idiots.

I find it hard to believe that nobody has mentioned the over inflated prices we are asked to pay for these homes. It may be the consumers fault at times but at what price are we to be "homeowners"? Sure Americans took on more home than they could afford, But what was it they purchased? A 900 sq.ft. apartment for an inflated price of $250,000.00? Why would anything cost the prices they are now asking for a home? Answer, someone is making a good living at these prices. Who made a living off of that deal? Let's try and list the ones to benefit most, I may miss some. 1. The real estate broker himself, the bigger the price tags the bigger the commissions. 2. The local bank or initial lender, fees, fees, and more fees. 3. The City, the higher the appraisal the bigger property tax bill to be paid. 4. Insurance companies, larger insured amount ,larger premium. 5.The investment banks buying the packaged loans. 6. The CEO pulling a bigger bonus because of the larger price tag of the packages purchased. 7. Etc, Etc, Etc,,, In other words, I have a feeling it was setup to end in this fashion. Hell, I'm just a Hillbilly and I moved all my 401k plan money to the guaranteed return account Dec. 10 2007!!!! And you're telling me they didn't see this as an end result? I think they did, and that they knew what they were doing from day one. The Americans buying these homes are trying to provide for their families while corporations are "living it up" on the fees and city officials are taking home bigger paychecks. Americans may be over extending themselves but how can they keep from it as long as all the odds are set against them?

Generally good article but i thought it was pretty light on Congress continual failure to both oversee the gses and their absolute refusal to reform all while feeding heavily at the trough of fannie and freddie. Many telling quotes from such so-called leaders as Barney Frank who said as according to the New York times in Sep 2003, "''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' Or how about Rep Melvin L. Watt, Democrat of North Carolina, who said: ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said. Or how about Chistopher Dodd who told the Washington Post that he thought the 2005 reform bill would only hurt low income families qualify for home loans. Recently, he had the gall to say to Bloomberg, ""I have a lot of questions about where was the administration over the last eight years." But we all know he won't face any storm of contempt over his short, selective memory. We need not criticize nor present him with his words, rather have compassion and allow him to steer our economy as he desired as the chairman of the senate banking committee.

I think there is an upside to this whole bailout issue that everyone is missing,remember all the money in question is taxpayers money.We,ve had a problem with homeless taxpayers for years,in the past these people had to panhandle, beg,and go to food banks.Under this new economic system they will be able to dine in any of the Banks cafeterias,I can hear the new talk on the street,have you tried the lunch at Fannies,beats Freddies by along shot,almost as good as the Bear Sterns buffet.