Government says, "All your banks are belong to US." (was Freddie and Fannie thread)

[Omnis]

Wow. Now THAT was a reach. Impressively done sir.

I was good at those claw machines.

 

[Sage]

http://www.kottke.org/08/10/the-financial-crisis-a-pokemon-parable

 

[Omnis]

http://www.kottke.org/08/10/the-financial-crisis-a-pokemon-parable

"Have you ever heard of Magic The Gathering?"

Here's another great article, this time written by none other than Jesus Huerta de Soto. http://mises.org/story/3138

 

[magburner]

Hey, Hey! Back again, like Sam Beckett leaping through his Quantum Leap Accelerator...

CAPITALISM IS DEAD! It isn't of course, because the leaches are still there! On a serious note though, can Anyone answer me this question... Why have America stumped up so little cash to avert this crisis? I mean, $700 billion dollars on the face of it sounds like a lot, but is it really enough?

The UK government is throwing cash around like it confetti! First they spend close to $500~ billion nationalising just two banks, then they guarantee almost all savings in the country, now they have thrown in another $800~ billion in cash (and other what-ever-you want to call its) to sure-up the major high street banks. So how on earth, is the pitiful $700 billion approved by the American government, going to go anywhere near solving the problems in the US?

One last question. has anyone got a ball park figure on how much cash GWB has blown in his time in office? He's had to fund two costly wars, and now this economic crisis, surely it must be in the 'multi-trillion dollars' ball park. I don't know about you, but I find that a shocking waste of taxpayers money.

 

[Omnis]

Hey, Hey! Back again, like Sam Beckett leaping through his Quantum Leap Accelerator...

CAPITALISM IS DEAD! It isn't of course, because the leaches are still there! On a serious note though, can Anyone answer me this question... Why have America stumped up so little cash to avert this crisis? I mean, $700 billion dollars on the face of it sounds like a lot, but is it really enough?

The UK government is throwing cash around like it confetti! First they spend close to $500~ billion nationalising just two banks, then they guarantee almost all savings in the country, now they have thrown in another $800~ billion in cash (and other what-ever-you want to call its) to sure-up the major high street banks. So how on earth, is the pitiful $700 billion approved by the American government, going to go anywhere near solving the problems in the US?

One last question. has anyone got a ball park figure on how much cash GWB has blown in his time in office? He's had to fund two costly wars, and now this economic crisis, surely it must be in the 'multi-trillion dollars' ball park. I don't know about you, but I find that a shocking waste of taxpayers money.

Posts like these make me wonder if John Maynard Keynes was the worst thing to come out of Britain.

The problem is trust, not money, so throwing cash on it won't solve anything.

 

[YSSMAN]

The problem is trust, not money, so throwing cash on it won't solve anything.

Keep in mind that McCain now wants to buy all of the mortgages and have the Fed manage them. Good idea, McCain. Lets allow the people who didn't take the necessary steps to fix this issue two years ago attempt to do the same thing with a market that is having home values collapse... With absolutely no benefit to the American taxpayer other than "knowing" that their loan is taken care of.

I may be a little more liberal than the rest of you on some economic things, but this is just silly.

1) Get liquidity back in the credit markets
2) Try to get the banks to balance
3) Return confidence to the market... We can't have -200 (+) point days on the DOW all week for the next few months...
4) Show leadership in the world for fixing our economic markets (BTW: The Chinese are laughing at us)
5) LEARN from these mistakes

 

[magburner]

I may be a little more liberal than the rest of you on some economic things, but this is just silly.

1) Get liquidity back in the credit markets
2) Try to get the banks to balance
3) Return confidence to the market... We can't have -200 (+) point days on the DOW all week for the next few months...
4) Show leadership in the world for fixing our economic markets (BTW: The Chinese are laughing at us)
5) LEARN from these mistakes

You forgot one:

6: Stop rewarding the kind of risk taking that has got us into this mess in the first place!

 

[FoolKiller]

Why have America stumped up so little cash to avert this crisis? I mean, $700 billion dollars on the face of it sounds like a lot, but is it really enough?

Enough for what? Enough to boost inflation, kill the value of the dollar, put the US in a situation that will be felt much longer than if the market just did its own thing? Probably.

In my opinion, it is $700 billion too much.

The UK government is throwing cash around like it confetti! First they spend close to $500~ billion nationalising just two banks, then they guarantee almost all savings in the country, now they have thrown in another $800~ billion in cash (and other what-ever-you want to call its) to sure-up the major high street banks. So how on earth, is the pitiful $700 billion approved by the American government, going to go anywhere near solving the problems in the US?

US savings are already insured, and have been for a while so that is not a needed step. And we have this crazy idea that a free market should remain.....ready for it.....FREE. Not a government entity. For many people in the US the interference this will allow without nationalizing the banks is too much. But that is because governments are far worse at business than business themselves. The fact that government regulations are what put us on this road shows that.

One last question. has anyone got a ball park figure on how much cash GWB has blown in his time in office? He's had to fund two costly wars, and now this economic crisis, surely it must be in the 'multi-trillion dollars' ball park. I don't know about you, but I find that a shocking waste of taxpayers money.

This bailout money costs much more than the wars at this point. But yes the war and bailout combined are over a trillion dollars.

6: Stop rewarding the kind of risk taking that has got us into this mess in the first place!

Wait, don't you mean stop regulating banks to give loans to people who shouldn't have had them in the first place? Or stop The Fed from creating artificial inflation by playing with interest rates like a child with a light switch?
I know you think that the evil capitalists are all to blame and all because of their greed, but government is the one who opened the door for them to get where they are today. Had the government not gotten involved banks would never have given out these kinds of loans, because they could have stuck to their "prejudiced" safe policies, and interest rates wouldn't have gotten so far off where they should have been that any guy with a job could think he could get a high-priced home.


This message brought to you by:

 

[Omnis]

Keep in mind that McCain now wants to buy all of the mortgages and have the Fed manage them.

Obama voted for this crap too.

In strongly believe that this bailout was the litmus tests for who should stay and who should go.

In other news, the Dow is below 9,000. Go, correction, go! Maybe by some miracle the market will bust in its entirety before the dollar printers get warmed up.

 

[YSSMAN]

Obama voted for this crap too.

It was my understanding that wasn't a part of the $700BN proposal (by which, we do not know if all will be spent), this is his (McCain's) own outside plan. The Democrats have given a similar plan before, however, the main difference is that McCain wants to buy out all of the mortgages for what they're worth on paper... Not market value as Obama suggested today.

Personally, I do not see us going FDR-style and federalizing the mortgages (yet).

In strongly believe that this bailout was the litmus tests for who should stay and who should go.

Yes and no. I think we should have had a better plan together, but that requires a belief that there are people elected to congress that are better than I think. I like my Congressman, I can't say the same for everyone else.

In other news, the Dow is below 9,000. Go, correction, go!

Word up. I was telling people months ago to get out while they still can, and its why I stayed out when I had money to kick in. I could see it diving until we get into the 7K range, but I could be wrong. I've heard far worse predictions from economics before, suggesting we'd get down to the 1-2K range.

Nevertheless, when my Grandparents are thinking about skipping their yearly trip to Florida because of it (and they have a lot of money), something is up.

 

[FoolKiller]

Word up. I was telling people months ago to get out while they still can,

Um, that thinking is why the markets are down. It is funny how people that worry about gas shortages, runs on the bank, or market crashes are the ones that directly cause it to actually happen.

My 401k has lost very little and I am contemplating putting more in so that it will have more value when things begin to recover.

Selling when things are low? Can someone point me to where that was the correct investment advice?

Stay diversified and you will be fine through this.

 

[Joey D]

Yup I just put a bunch of money into the market yesterday through my financial guy, got into a really good Biotech fund as well as a technology fund (stocks like Apple, Google, Activision). My portfolio hasn't really taken that much of a beating and I'm still up more than 30% over my original investment.

 

[YSSMAN]

Um, that thinking is why the markets are down.

I'm talking about when the DOW was rated at the 12-14K range, when everyone was screaming "Invest! Invest! It can only go higher!" I get a little weary when we stray too far above $10-11K, and while it was great to have a booming market, I told people that its probably a good time to cash-out you highly valued stuff and start to diversify a bit.

Obviously now, even if your diversified, it doesn't do you much good at all.

I'll be putting some money in when I get a sign that we're starting to get closer to the end of the woods. But I don't expect that to happen for a while.

 

[FoolKiller]

Obviously now, even if your diversified, it doesn't do you much good at all.

If you call not having my retirement drop like a rock not much good. I, on the other hand, call it pretty dang spiffy.

 

[Keef]

So, what's the deal with Iceland and Russia bailing them out? Apparently their currency pretty much collapsed and everything went to pot. Can a country declare bankruptcy? I heard they were "considering it". Also, they were talking about countries nationalizing their banks, buying them out and whatnot. I can't imagine the American government going to that step. There'd be a lot of very angry citizens and I'm sure there'd be bad things happening besides the economy. Assets of companies and the government are already not worth very much, but they're worth even less when they're all on fire, if you know what I mean. Lastly, I don't think the market has bottomed out yet. I'm guessing we'll have many more days of losses. Hopefully they don't take out 500+ at a time like the last few.

 

[YSSMAN]

A country certainly can declare bankruptcy, but on the specifics of it, your guess is as good as mine. I found it interesting that Russia is coming to the aid of so many countries, it looks as though they're putting their petro-dollars to use. This is a very interesting time in so many different ways, but I have no idea what to expect anymore.

 

[Casio]

I found it interesting that Russia is coming to the aid of so many countries, it looks as though they're putting their petro-dollars to use.

Buying Allies.

 

[magburner]

@Fool Killer:

Sorry I took so long to reply, I'm not always the master of my own time!

I agree with some of what your saying, except I place the blame for this solely at the feet of the banks. Your saying that The Federal government forced the banks to issue 'sub-prime' loans, but did the banks ever protest? The simple fact of the matter is that when the going was good, the banks said little. Its only now that their carefully crafted scam has come to light, that they are pointing their fingers at a piece of legislation.

One thing the government never did was to force banks to sell bad debt on! I believe that it was that selling of bad debt that has caused this whole catastrophe in the first place, and why so many banks have failed. God knows how the hell you can make money out of bad debt is beyond me, but that shows the depth of greed that these banks will stoop to just to get another buck.

I was also surprised by your comment regarding the government and them apparently 'opening the door'. I think that is a ludicrous statement at best, and a very poorly worded cop-out at worst. It also proves that banks can't be trusted. It also holds no water whatsoever Some banks in my country have been doing the same practises as those in the US (ie. issuing 115% loans at 7 or eight times a persons salary), and there is no legislation I know of over here that forces any bank to issue home loans to those that cannot afford to repay them.

Regarding the $700 billion dollar bail out being $700 billion dollars too much, I'm of the thinking that it is nowhere near enough! This credit crisis has cost my country dearly. It has been bandied about on TV, and in the press, that it will cost everyone of us in this country £20,000. That is an absolutely disgraceful amount of money to waste on a problem that did not originate in our country.

I also believe that America should compensate the world for its gross financial mismanagement, and the dollar should also be taken out of economics, in favour of more rational governmental policy, and a more stable currency. I'd go with Stirling, but then again, I'm biased.

As for the 'evil Capitalists', I don't think that they are evil at all, no more so than exponents of any other ideology. The evil ones are those that have coveted avarice, at the expense of the rest of us, and using Capitalism as as a smoke screen. On paper, Capitalism works, in reality (like most ideologies), it is fundamentally flawed.

 

[Danoff]

On paper, Capitalism works, in reality (like most ideologies), it is fundamentally flawed.

Oh? Please, enlighten us.

 

[magburner]

Oh? Please, enlighten us.

Global financial meltdown? Or have you just got back from holidaying on Mars? If Capitalism worked, would we be in the situation we are in now? I don't think so, unless you know something I don't.

I don't claim to know the ins and outs of Capitalism, but I get the basics. What I can't understand is why GWB resorted to nationalising Freddie Mac, and Fannie Mae (or whatever they are called), surely that goes against the fundamental laws of Capitalism, or am I wrong there?

 

[Joey D]

I think more people and factors were involved then just President Bush with the global economic crisis.

Oh and all systems are fundamentally flawed since we don't live in a perfect world, you'd be just as screwed under any other form of economic system.

 

[Danoff]

Global financial meltdown? Or have you just got back from holidaying on Mars? If Capitalism worked, would we be in the situation we are in now? I don't think so, unless you know something I don't.

Which country is it, exactly, that you think is practicing capitalism?

...why GWB resorted to nationalising Freddie Mac, and Fannie Mae (or whatever they are called), surely that goes against the fundamental laws of Capitalism, or am I wrong there?

Are you under the impression that the US is currently practicing capitalism? Because that sounds an awful lot like socialism to me.

Oh and all systems are fundamentally flawed since we don't live in a perfect world, you'd be just as screwed under any other form of economic system.

Not all economic systems are made equal. Capitalism is the best from both an economic and human rights standpoint. Too bad the US has so many socialist policies.

 

[Joey D]

Not all economic systems are made equal. Capitalism is the best from both an economic and human rights standpoint. Too bad the US has so many socialist policies.

Yes capitalism, under perfect circumstances, might be the best but since no society exists you can't say for sure that a purely capitalistic society would be ideal. I could see some people's rights being trampled in a perfect capitalist society, although the economy would be strong. The same can be said about a purely communist society, one doesn't exist so we can't say whether it would be good or not.

 

[Danoff]

Yes capitalism, under perfect circumstances, might be the best but since no society exists you can't say for sure that a purely capitalistic society would be ideal. I could see some people's rights being trampled in a perfect capitalist society, although the economy would be strong. The same can be said about a purely communist society, one doesn't exist so we can't say whether it would be good or not.

Where capitalism is practiced, it works beautifully. Where communism has been practiced, it has failed miserably.

The US has been tampering with it's capitalistic underpinnings for over 100 years. We started tampering with it in a huge way during the great depression (a problem brought on and exacerbated by government not recognizing it's proper role in currency). That tampering has caused many economic problems for the last hundred years, and still is. (What I mean by "tampering" is "enacting socialist policies")

Did stupid people make bad investment choices? Yes they did. Do those people need to lose their homes/businesses? Yes they do. Were these bad investment choices incited and spurred by government pressures? Yes they were.

This is not a failure of capitalism, it's a failure of government to recognize it's inability to perform central planning. Capitalism is prescribing the appropriate cure for many people - getting spanked. But government is once again trying to refuse basic economics.

It's not so much that capitalism works and other systems don't. It's that capitalism IS economics. And you can't fight economics no matter how hard you try.

 

[magburner]

Which country is it, exactly, that you think is practicing capitalism?

Well, when I first posted, I assumed America was. But, I've Just been reading up on Ayn Rand, and others, and America isn't practising true Capitalism (well not the type you believe in anyway!)

I may of got things wrong with Capitalism as an ideology being flawed, what I should of said was as an economic system it is flawed. I wrongly assumed that both were the same, and maybe they are not. Accept my apologies for that. 👍

Answer me this though, why is Capitalism often mentioned in the same sentence as America, and regularly when America's economy is discussed? If America isn't practising Capitalism, then why is Capitalism synonymous with America?

Are you under the impression that the US is currently practicing capitalism? Because that sounds an awful lot like socialism to me.

That's what I thought. When it first broke in the news over here (in the UK), they were calling GWB Comrade Bush!

 

[Danoff]

Answer me this though, why is Capitalism often mentioned in the same sentence as America, and regularly when America's economy is discussed?

Because America was founded capitalist, and American citizens do not realize how socialist it is here. We have very slowly enacted a large number of socialist programs - slowly enough that people here don't realize just how many there are. Sure, there are fewer here than most other countries - but that doesn't change the fact that we have many and the numbers are growing (universal health care anyone?).

Furthermore, we've been slowly overthrowing democracy. Regulatory agencies headed by unelected officials have the ability to effectively make law here. The number of agencies has been steadily growing, and amount of law made by them increasing. If that's democracy, or a republic, or any kind of representative government... I certainly don't recognize it.

So yea, there are a lot of incorrect assumptions out there about what kind of system America has right now.

 

[YSSMAN]

Where capitalism is practiced, it works beautifully. Where communism has been practiced, it has failed miserably.

Just as a question, how do you define The People's Republic of China in terms of an economic system? In my opinion, it has shades of both, and to some extent their version is working a little better than ours.

...Just a small point as well...

No one likes Communism here in the West, but that pesky little bugger 90 miles off the coast of Florida does. They seem to be holding together fairly well too.

 

[Omnis]

Global financial meltdown? Or have you just got back from holidaying on Mars? If Capitalism worked, would we be in the situation we are in now? I don't think so, unless you know something I don't.

I don't claim to know the ins and outs of Capitalism, but I get the basics. What I can't understand is why GWB resorted to nationalising Freddie Mac, and Fannie Mae (or whatever they are called), surely that goes against the fundamental laws of Capitalism, or am I wrong there?

Lol. The United States hasn't had free market capitalism in like 100 years, as danoff already explained.

Just as a question, how do you define The People's Republic of China in terms of an economic system? In my opinion, it has shades of both, and to some extent their version is working a little better than ours.

...Just a small point as well...

No one likes Communism here in the West, but that pesky little bugger 90 miles off the coast of Florida does. They seem to be holding together fairly well too.

The PRC could be described as capitalistic, but with only the state and its cronies participating. I see it as kind of like a backwards Fabianism.

It's unfair to say that Cubans like Communism. They don't know any better. All of the Cubans who don't like communism are either dead or have escaped. The communists control everything there, so you won't find anything that criticizes them.

 

[magburner]

Because America was founded capitalist, and American citizens do not realize how socialist it is here. We have very slowly enacted a large number of socialist programs - slowly enough that people here don't realize just how many there are. Sure, there are fewer here than most other countries - but that doesn't change the fact that we have many and the numbers are growing (universal health care anyone?).

There is nothing wrong with socialism. We have a socialist democracy in this country, and I'd say that our democracy is a fine example of democracy done right, and something to be immensely proud of!

Furthermore, we've been slowly overthrowing democracy... If that's democracy, or a republic, or any kind of representative government... I certainly don't recognize it.

Well, after watching the first vote in the House of Representatives regarding the $700 billion bailout plan, I'd say that democracy was painfully alive! I honestly never realised how pedantic democracy could be in America.

I always assumed that when a representative was elected into government, that gave them the power to act on your behalf, no matter what the situation. Not so in America. In the UK it works perfectly. Our government didn't have to go to parliament for approval of its banking bailout, it acted, and decisively.

Sure its going to cost us in taxes in the, but the cost in economic terms would of been far higher. From watching the reports on TV at the time, I was surprised how the majority of Americans could not get past the fact that they would have to pay higher taxes, as if that was their only concern.

I mentioned earlier that the dollar should be taken out of economics in favour of another currency (namely Stirling), I think now more than ever is the time to do it! Our government (with its bailout plan), has shown great financial leadership in this matter and proven that we understand economics, more so than any other country in the world. It would be a logical step too, as we already are the financial capital of the world!

 

[FoolKiller]

Danoff responded to most of this so I will just address the bits I didn't see responded to.

I agree with some of what your saying, except I place the blame for this solely at the feet of the banks. Your saying that The Federal government forced the banks to issue 'sub-prime' loans, but did the banks ever protest? The simple fact of the matter is that when the going was good, the banks said little. Its only now that their carefully crafted scam has come to light, that they are pointing their fingers at a piece of legislation.

I am not going to say that greedy banks didn't play a roll in this. They did. But at the end of the day no banker forced individuals to sign loan agreements. No, that was the individual's responsibility. If you are going to spend six digits worth of money shouldn't you research the situation first?

One thing the government never did was to force banks to sell bad debt on! I believe that it was that selling of bad debt that has caused this whole catastrophe in the first place, and why so many banks have failed. God knows how the hell you can make money out of bad debt is beyond me, but that shows the depth of greed that these banks will stoop to just to get another buck.

I was also surprised by your comment regarding the government and them apparently 'opening the door'. I think that is a ludicrous statement at best, and a very poorly worded cop-out at worst. It also proves that banks can't be trusted. It also holds no water whatsoever Some banks in my country have been doing the same practises as those in the US (ie. issuing 115% loans at 7 or eight times a persons salary), and there is no legislation I know of over here that forces any bank to issue home loans to those that cannot afford to repay them.

What the government did was artificially adjust interest rates. Suddenly bad debt looked like good debt. Individuals suddenly thought that they could afford a house. And some bankers probably thought that these loans were going to work out, but factored in the risk by making it an adjustable rate.

Had the Fed not tried to implement governmental control on inflation and create this ownership society that Clinton and Bush were harping on none of these loans would have been in the reach of individuals and no banks would have been able to give them out. Yes, the government opened the door for the greedy to take advantage, but that did not just come from bankers. An individual jumping to buy a house for a cheap rate is just as greedy as the banker because they thought they were getting a steal off the bank.

That is an absolutely disgraceful amount of money to waste on a problem that did not originate in our country.

If it was such an obvious thing that this is the result of greedy bankers then the people in your country who invested in those banks were greedily scavenging off the greed of the American bankers. No one made them invest that way. It has been no secret for years now that this market had to give and anyone who didn't heed that advice made their own bed.