I Repeat: It's Not Just a "Wall Street Bailout"

[...] In a recent recent blog post titled, “I Repeat: It’s Not Just A “Wall Street Bailout” [...]

The worse problem occured when countless times the president has tried to fix Fannie Mae and Freddie Mac and they all were shot down. We could have stopped this from happening. The real fix will give consequence to bad lenders for making bad loans.

We as a country have lost our way.... Our esteemed leaders pontificate to us, the constituents, as though speaking to school children, with analogies of freeway's clogged with cars from accidents and breakdowns much the way the financial institutions are with "toxic assets"! They proclaim their outrage and play their partisan games. Well I got news for 'em. I run a small business and employee approximately 50 people. I have toxic assets too! They are called my employee payroll, my rent, my light bill, adhoc, infinitum . If I have to borrow just to meet these obligations, I'm done and no one comes running to my aid. The Fed has infused $600B into the markets in the last week or so and now we're going to give another $700B with no real idea where this will end. If I ran my business that way, I would be back talking to the lender sooner or later needing more. For decades they have created a climate which urges companies to ship actual jobs to foreign lands. A climate reminiscent of pyramid schemes.... hey, get your friends to get their friends to get their friends to give you $100. You'll be rich! In the end the guys at the bottom of the pyramid get nothing! It's a fools game. I don't pretend to understand the economic/accounting doublespeak which is barraging us these days. But I sit in wonder when I read something like the following from EMacs Blog But look closely and you’ll see a stunning 53% of GE Capital’s net worth, a total of $31.6 bn, is in mushy ephemera, goodwill and other intangible assets. Meaning, it’s got $28.4 bn in hard assets. Goodwill and intangibles are often smoke and mirrors term, both somewhat of an accounting artifice, as they are typically the price tags given by accountants and actuaries to assets picked up in acquisitions, for things like the brains in an R&D operation, the future value of licenses and patents, and such. Remember, more than half of GE Capital’s net worth, its book value is, well, your guess is as good as mine. The bankers and politicians and big business leaders in this country live in a much different reality to mine. I have news for them all. The recession is here, it's been here. I can tell you the date it started. As a nation we have forgotten the value of a dollar and a hard days work. We have been living on borrowed time and money. Sadly I fear we will have to try and eek out an existence on borrowed money for some time to come... time though has run out!

We DO recognize that this is a problem for mainstreet too.. no one is or has ever been in denial of that fact! That was never why we wanted this bill voted down! While everyone in the media complains about how mainstreet isn't listening or doesn't see the real consequences, I believe it's everyone else that hasn't been listening to us! The reason we are against this bill is because we don't trust our government, we don't trust this plan to work, and we don't want our wealth and freedom stolen from us in the process! In other words, we trust the free market system more than we do our own government and we would rather take the hit now (and yes, we know that means our 401k's, retirement, college loans, and jobs) than leave the mess for our kids to clean up! Call it throwing in the towel, whatever you want to call it... or maybe it's just called REALITY! Let the markets work it out on it's own, and maybe our kids will get to live in a stronger and better (and free) America. Has anyone else noticed that security systems, safes, and gun sales are at an all time high?? Instead of debating the merits of a flawed bailout plan filled with wooden arrows and race tracks, we need to start thinking about damage control and educating people on what they need to do right now to prepare themselves for what is coming. We should be spending this money on debt counseling services, putting consumer education classes back in our schools, and getting those vultures (credit card companies) off of our college campuses. Americans need to learn how to actually invent things and make products again instead of painting other peoples nails, trimming their bushes, and stealing their money for a living! We can overcome this, but not if we let "business as usual" in the United States prevail.

Bankers want main street to pay there debt. They made a mess of all this. They didn't get there way last monday and throwed a fit like spoiled little rich kids. Nobodys head has rolled for this and they want us to just hand over 700 billion dollars to them. Thats like a crackhead saying there going to rehab when they get done with that last rock. The bank ceo's will make a bigger mess AGAIN. It will not be the end of america if we just it let them loose.

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Folks, buying back these bad loans is being mandated by our Chinese financiers; keeping you focused on the few in Wall St. whose bacon will be saved by this is a diversion from that, which is the real reason for the bailout. The Democrats like it because it builds up anger and resentment against the "evil rich", helping their side in the election. Bush has to do it because if he doesn't, the Chinese have threatened to sell our dollars, which would finish us for the next ten years. Would they really do that? That is something we REALLY can't afford to find out.

The $9.3 billion dollar Commonfund has frozen, locking up money for the more than 1,000 colleges and universities that use it as a de facto bank account. This could make it difficult for the schools with their money in the fund to pay for vital operational and payroll needs. Brian,These same schools are and have built mammoth "Monticellos" with pork from Homeland Security bills.They're paying football coaches $4million per year for Gods sake and I'm supposed to feel sorry for them? Auto sales last month were dismal, with fewer than 1 million cars and trucks sold in September. Of course they were.Everyone HAS a vehicle.It's called supply and demand.With easy credit,everyone bought new vehicles,paying for them for 7 years.How can they buy more when they still owe on the last one?I won't even get into paying more for groceries,gas,and every petroleum related item out there. Small business owners who need to meet operation costs or grow their business are finding it increasingly difficult. While there are loans available, they are at sky-high interest rates. What makes it MY responsability to see that the "small business owner" can borrow money?You're advocating taking my money because the "small business owner"can't get credit.Guess what?He shouldn't base his business model on his ability to get credit. And let’s not forget the housing market. Consumer spending is 70% of the U.S. economy. Much of that is related to housing. Not just with realtors and builders, but also everyone who benefits from home transactions such as furniture salespeople, contractors and moving companies. Supply and demand Brian.Everyone who wanted a home,got a home.The problem being,they all couldn't afford a home.Let's not also forget Brian,that while we've been basing our economy on building houses,we've been shipping jobs overseas. Brian,we've had the biggest boom to housing ever.Record profits and record sales of household items,homes,appliances,etc.,, were made.At some point,that was destined to end.You're not seeing the market contract,you're seeing the market correct itself from a false/propped up economy and you're advocating propping it up even more.

The other question I have, is in regards to the attempts by this administration and thier financial "wiz kids" to correct the economy over the past couple of years. Interest rate drops, tax bribes, so on so forth. Everything they have done so far has failed. Why should this be any different.

I don't think I have ready anyone saying this won't affect (God I hate this term) " Main Street". I understand perfectly well that it will. My concern is that everyone, other than Congress, is saying the credit crunch may not even stop once this is done. So, you and Congress and the wealthy fatcats are asking us to give 700 bil to maybe, possibly stop the credit crunch. What happens when the 700 bil fails? Should we add an additional trillion or 5 trillion? I can't beleive with all of these supposed financial geniuses this is the best we can come up with. Not only do we have 700 billion on the plate, they have added 100 billion in tax cuts, and who knowns how much in other bills. And none of what they are doing protects the tax payer. My taxes are going to go up and we probably won't even solve the problem. I am also giving these idiots the idea that anytime they are in trouble, well the Government will make the people pay. So, I will continue to be against this and I will do my best to vote out anyone who supports it. There are otherways, if congress were willing to listen.

Brain, why is it that the only people for this bailout are politicians trying to cover their butts, Wall Street insiders like you, and fat cats whose bonus could go down by 0.000001% if they don't get my money. Maybe car sales down because banks and finance companies finally came to their senses or consumers came to theirs. We are either going to face our debt crisis now and not mask it for another 6 months.

Brian, Are you saying that you make a distinction between voluntary and involuntary servitude?

Why would anybody continue to pay on any mortgage from now on? The prudent thing to do would be to just patiently (while not spending a dime) wait for the government to contact you to discuss how much less your loan principal now is and how much lower your payments will be. This bailout could be a the single greatest thing to happen to homeowners. Barney Frank, you are the man!

Brian - Who is kidding whom here? Congress would be much better off taking that exact dollar figure and actually dispense with all of the bad loans out there across the country. That might actually make some sense. This rescue effort, however, is not going to free up credit. It will, unfortunately, weaken the dollar and contribute to inflation. I do not believe "main street" is complaining about the amount as much as they are with "who" is in charge!

What is crazy is that no other plan has even been looked at! Are you going to tell me that the federal government adding $700 billion dollars to the national debt is the ONLY possible solution to this crisis? With minimal Internet searching, I have found several other plans that look much more plausible than this one, and they cost at most, $50 billion; some of them cost the taxpayers nothing. Americans and the American government both need to learn to live within their means. We depend FAR too heavily on credit, and this crisis is proof that we as a nation need to change our ways.

I agree the bailout isn't just for Wall Street, it's for all irresponsible individuals and businesses. It's a ridiculous attempt to sidestep the reality of financial gravity as it weighs heavier and heavier on the dollar and on credit. We all know that this does NOTHING to restore consumer confidence. What it does is reinforce the average American's disdain for big government and fiscal irresponsibility. We know from history past we are still going to fall, only now however, if this passes, we can be assured that it will be from a higher tower (built on socialist principle) and the splat will be even worse. Keep building the tower guys. Go head. Take more. Lend more....nothing wrong here....just go on about your business and leave this mess to the Government.they are so much wiser than you...they take care of you! They could make money and pay you back. Please! I have ZERO confidence in that notion. ZERO.

Brian, Is it possible that one of the other reasons fewer cars and trucks were sold in September is due to the fact that people are maxed out on credit. You can only trade you car in so many times before you are so upside down on it that you just have to hang on to it and pay it off. I have known people that couldn’t afford to buy new tires for their car but they were able to take it to the dealer and trade it in on a brand new one. The county has sold a record number of cars, houses, and everything else you can think of over the past 10 to 15 years. All of this was paid for on credit. Sooner or later you have to stop and pay some stuff off before you charge something else. Even if the banks start lending again there will not be the big influx of spending. People just can’t afford it. I read and article today on time.com that said "In the case of households, debt rose from about 50% of GDP in 1980 to a peak of 100% in 2006. In other words, households now owe as much as the entire U.S. economy can produce in a year" and this is what it said about financial institutions: "Banks and other financial institutions are in an even worse position: their debts are accumulating even faster. By 2007 the financial sector's debt was equivalent to 116% of GDP, compared with a mere 21% in 1980." On top of this our national debt is approaching $10 Trillion. Does anyone think we really need to borrow more money on top of all this?

Focus on the Future Face it, many Americans and American institutions from the Federal Government, to Wall Street are in debt up to their eyeballs. We have been on a credit binge unseen before in human history.... We changed accounting rules in order to support our binge; never a thought of the potential consequences. We told regulators to look the other way while we partied and shunned Greenspan in 1996 when he asked for reason. This financial crisis has many fathers, but few sons. Where the economy goes from this point forward has few, limited options. Congress’s focus should be on those potential outcomes. It is my speculation that all this excessive borrowing grew the economy beyond its natural state, in a less levered world GDP would be smaller, as much as 20 percent smaller. It does not take a PHD from MIT to know that contracting GDP by 20 percent will have a dramatic impact on Main Street, let alone Wall Street. This coming economic contraction (Recession) will not be pleasant but will not be Armageddon either. The argument that we the people do not understand the economic impact if Congress does not spend $700 billion on toxic securities is nonsense. Explain to the family whose breadwinners lost their jobs, house, prestige and ability to provide for their children that they do not know how bad the economy can get. A way forward Let investors enjoy the risk of their rewards and spend the $700 billion on the other side of this crisis. Not knowing what the crisis will bring or how it will change consumer behavior makes spending the cash difficult. Domestic energy production, renewable and non is always a good investment. For instance, why not tap the geothermal gift of Yellowstone. It may demonstrate that we can control the temperature of the caldera by producing cheap electricity. While there maybe no limit to wind, there is a limit to wind power. Solar could be made mandatory as part of new construction in climates with high solar potential. We have to start thinking about the future of our economy and not the market.

I know it's a hard pill to swallow but these companies who find it "increasingly difficult," need to be weeded out of the system. It is not possible to expand business without the death of business elsewhere. Businesses that are borrowing to make payroll are about as intelligent as Americans who have spread their credit so thin that they are living paycheck to paycheck. They have no one to blame but themselves. But this is not the new american way. Credit card companies and advertisers and businesses of all types will recieve the blame for "making" Americans over-spend. Thats what a strong economy is made of, right? Spending our money like good little consumers. Consider the percentages of income that return to the economy in a rich vs. middle/lower class. Where as the wealthy "have more disposable income," that doesn't mean that they are going to spend it. The middle/lower class return nearly all of their money to the local economy. I have yet to feel "the pinch." No doubt some of my neighbors are feeling or will feel it in the future and if that time comes my family will be there to lend them a hand. Actions like that used to be a widespread common everyday thing in this country. Then came the cheap money and all of a sudden everyone is trying to out spend their neighbor instead of living within their means and helping each other. Everybody on the block doesn't need an Air compressor and a welder, and countless corded and cordless tools. But Lowe's and Menard's and Home Depot tells us we do.

Yes, by all means let's fix this mess with the 700 billion (who are we kidding?)govt BAILOUT. Then we can go on spending more than we make, get another credit card (or 2 or 3), buy a new car (gotta help Ford)on my good new credit. Of course my taxes will skyrocket, but I can just adjust my deductions (govt will get less revenue)- What a recipe for disaster! America needs a bread, soup line wake-up call. No one is going on exotic expensive vacations, buying new homes, new cars- Oh the Shame!!! I never thought that living modestly was such a SIN!!!!