House rejects Bailout; DOW drops 650

[Jon Miller]

And that doesn't even address the fact that there is more than 700b of toxic assets out there.

JM

[Imran Siddiqui]

Even if they don't break even (and I think they will... remember the government made money on the S&L crisis), I'd imagine not going into Great Depression II (or at least Panic of 1873 or 93 II) would more than make up for it.

[Kidlicious]

You can't say for sure that that won't happen anyway.

[Jon Miller]

That is my point.

How come this is the best way to not have it become another depression? This is a lousy solution, but it is being marketed as the only solution. Yet it is the solution that helps the finance industry the most.

Hmm, I wonder why it is being marketed as the only solution?

JM

[Imran Siddiqui]

Originally posted by Kidicious
You can't say for sure that that won't happen anyway.

Perhaps not, but you really can't say for sure that any economic plan won't prevent a Depression. Does that mean we just go like the libertarians and do nothing? I don't think that's what you meant .

[Imran Siddiqui]

Originally posted by Jon Miller
That is my point.

How come this is the best way to not have it become another depression? This is a lousy solution, but it is being marketed as the only solution. Yet it is the solution that helps the finance industry the most.

Hmm, I wonder why it is being marketed as the only solution?

JM

It's being marketed as the best solution. And one that may have a chance of passing. I'm sure you'd like to nationalize them all, but (aside from the fact I think its far worse than the $700B asset purchase) there is like less than 1% chance of that happening.

[Kidlicious]

Originally posted by Imran Siddiqui


Perhaps not, but you really can't say for sure that any economic plan won't prevent a Depression. Does that mean we just go like the libertarians and do nothing? I don't think that's what you meant .

I don't believe we should do nothing. I just don't trust the government to be fair or do the right thing. Look at Obama's new proposal, increase FDIC insurance. WTF?! That kind of thing just decreases confidence.

[Jon Miller]

Originally posted by Imran Siddiqui


It's being marketed as the best solution. And one that may have a chance of passing. I'm sure you'd like to nationalize them all, but (aside from the fact I think its far worse than the $700B asset purchase) there is like less than 1% chance of that happening.

Both the libertarian and socialist sides have far better solutions for the problem then this corporate big money bailout.

That should tell you something.

JM

[Imran Siddiqui]

Originally posted by Kidicious
I don't believe we should do nothing. I just don't trust the government to be fair or do the right thing. Look at Obama's new proposal, increase FDIC insurance. WTF?! That kind of thing just decreases confidence.

So what's the plan? If we shouldn't do anything, but the government can't be trusted... well, we are in a bind, aren't we?

[Kidlicious]

Originally posted by Imran Siddiqui


So what's the plan? If we shouldn't do anything, but the government can't be trusted... well, we are in a bind, aren't we?

For one the correct plan has to include a solution. This one doesn't. The financial sector is way too big. Left like this the same thing is going to happen again.

Also, it's too much money. They shouldn't get that much. If they want to spend that much money they should do some other things to help other people not just this industry.

[Imran Siddiqui]

So... what's the plan?

And remember, it has to pass through Congress & the President as well.

[Aeson]

Well the plan should have some fixes to the underlying problems. Those problems being...

too much leveraging...

not enough transparency on balance sheets... (hell, these firms don't even know what their own liabilities are, how can investors?)

trillions in paper with no market...

insane lending practices...

I don't see anything in this bill that even attempts to address those issues. (Though lending practices have for the most part by now become more sane on their own.) There are lots of potential fixes, some may work, some may not... but throwing money at the symptoms is not even an attempt.

I'd suggest:

Standardization for the paper (MBS, CDS... whatever) and public exchanges for them to be traded on. Or at least a clearing house that keeps track of transactions (CDS).

Deleveraging over time, and leverage caps set back to ~10x.

Accounting changes. I'd require everything is marked to market. If there is no bid, it's a 0. I know there are some problems with that for certain types of instruments... but we can figure ways to package assets so they can be marked to market. Let firms know this is how it's going to be, so that when they're coming up with the next "big thing" in financial instruments, they'll need to set things up so there is a market for them. (Standardization of the paper, and an exchange or clearing house for it.) Because we really don't need a repeat of this CDS mess.

Maybe once you get some real attempts to fix things in there... then you can start thinking about throwing money at it. Otherwise it's just a bandaid that will fail to improve anything long run, and actually encourage it to get worse.

[Agathon]

Originally posted by Aeson
Well the plan should have some fixes to the underlying problems. Those problems being...

too much leveraging...

not enough transparency on balance sheets... (hell, these firms don't even know what their own liabilities are, how can investors?)

trillions in paper with no market...

insane lending practices...

I don't see anything in this bill that even attempts to address those issues.

Of course not. The rule from history is that it's often the last thing that people are willing to give up that is actually causing the problem.

All empires fall this way.

[Colon™]

Originally posted by Jon Miller
Both the libertarian and socialist sides have far better solutions for the problem then this corporate big money bailout.

That should tell you something.

JM

That, as usual, extremists from opposite sides actually have in lot in common?

[Patroklos]

I'd require everything is marked to market.

This is the case now and has been since Enron and co, and is one of the leading causes of the current problems.