Bush Bailout Speech

[Helena]

Dubya began his speech explaining that since so many Americans
can't pay their mortgage this has caused international bad paper.
And investors who bought all that bad paper are getting burned...
so you Americans [who still can't pay your mortgage] need to spend
a trillion dollars to bail out all those investors.

Yeah right... that will go over like a lead balloon.

[ejman]

I'm no great fan of Dubyas but I actually thought the Shrub's little talk wasn't that bad... YMMV

[Helena]

Deja Vu


Daddy Bush spent billions of taxpayers' money
bailing out the S & L crisis... and John McCain
was one of the Keating Five.


" The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. "


" The U.S. Savings and Loan crisis of the 1980s and 1990s was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. taxpayer. "

Keating Five - Wikipedia, the free encyclopedia

[playaman]

Watching Mr. Bush deliver tonight's speech was painful. His heart wasn't in it, almost as if he perceives the American people are mostly ignoring him these days. Perhaps they are. By W's standards, it wasn't a bad speech, but totally nonmemorable.

[ziggy29]

Hoo-boy. If this one avoids the Soap Box, it may be a miracle...

[Helena]

True believers do not change their beliefs when the going gets rough.


Quote from Bush speech:

" I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly. There's been a widespread loss of confidence. And major sectors of America's financial system are at risk of shutting down. "


President's Address to the Nation

[Gone4Good]

Thought it was decent, and necessary. Paulson and Bernanke didn't do a very good job the last two days of selling this in political terms. Instead they spent the week talking to everyone as if they could tell a mortgage bond from Barry Bonds from a cow. They can't. People need to be told . . . "You may not be able to get a car loan. You may not be able to get a mortgage. You may lose your job. Your 401(k) balance will likely decline more. Your credit cards might get yanked. Your standard of living might decline. If we don't do this" W, did that tonight.

[Gone4Good]

Quote:

Originally Posted by Helena True believers do not change their beliefs when the going gets rough.

In a financial crisis, everyone is a socialist. (kind of like there are no atheists in a fox hole)

[Htown Harry]

Quote:

Originally Posted by ejman I'm no great fan of Dubyas but I actually thought the Shrub's little talk wasn't that bad... YMMV

I had the same reaction....from the same starting point.

The "how we got here" part was probably the best part. He His speech writers did a pretty good job of stringing together the basic elements of the of the crisis' cause and effect . Granted, there were some oversimplifications and some tilts in the details that I haven't heard before (too much foreign investment in mortgage securities??), but it was an explanation that a person with limited education or financial sophistication could understand.

It got weaker as it went along, however. Lots of scary words (recession, crisis, panic, etc.) were used to make a case for action, not logical arguments.

I'd give it a solid B, maybe an A- on a curve that includes only the last 8 years of presidential speeches.

Even a blind pig finds an acorn once in a while.

[capjak]

Good Speech, I thought.

We need both McCain and Obama to work with Congress to get this nailed down and make sure it is the right thing to do for all of us...non partisan both take the political risk/reward.

[Helena]

Quote:

Originally Posted by . . . Yrs to Go In a financial crisis, everyone is a socialist.

Privatize profits - Socialize losses

From each American according to his ability to pay taxes....
to each corporation according to its need to service debt.

As Dave Ramsey would say... cut up the credit cards
and pay cash for your car... debt is what got America
into this mess.

[haha]

Quote:

Originally Posted by Htown Harry Granted, there were some oversimplifications and some tilts in the details that I haven't heard before (too much foreign investment in mortgage securities??), but it was an explanation that a person with limited education or financial sophistication could understand.

China was loaded to the gills with Fannie/Freddie MBS. They were leaning on Paulson.

Ha

[Caroline]

Quote:

so many Americans can't pay their mortgage this has caused international bad paper.

ok, this is probably the dumbest idea in the world but...

If mortgages are the heart of the problem, then what would it be like to take the trillions that we're going to spend on the bailout and just pay the durned mortgages? Or pay the difference between what the house is worth and what is owed on it? Or turn all those variable rate mortgages into 30-year fixed debts? Something like that could keep the little guy / gal in their homes, AND keep the investment banks afloat, AND keep all that international paper afloat (as opposed to circling the drain as it is now).

It can certainly be argued that it's not fair or right to save those who overextended themselves, but since we supposedly smarter taxpayers are going to take it in the shorts anyway, why not doing something REALLY different and start it at the bottom instead of the top?

Wouldn't we get more social stability / economic stability for our buck that way?

[dex]

Quote:

Originally Posted by Caroline ok, this is probably the dumbest idea in the world but... If mortgages are the heart of the problem, then what would it be like to take the trillions that we're going to spend on the bailout and just pay the durned mortgages? Wouldn't we get more social stability / economic stability for our buck that way?

The issue is liquidity.

Subprime mortgage crisis - Wikipedia, the free encyclopedia
The widespread dispersion of credit risk and the unclear effect on financial institutions caused reduced lending activity and increased spreads on higher interest rates. Similarly, the ability of corporations to obtain funds through the issuance of commercial paper was affected. This aspect of the crisis is consistent with a credit crunch. The liquidity concerns drove central banks around the world to take action to provide funds to member banks to encourage lending to worthy borrowers and to restore faith in the commercial paper markets. The U.S. government also bailed-out key financial institutions, assuming significant additional financial commitments.
======
also,
- mtg backed securities are bonds - because of the current negative mortgage situation they are depressed in price.
- most people will pay their mort.- a few won't
- in the future, when the gov't sells them, they should be up in price



good site to know

Mortgage-Backed Securities (MBS)

[Helena]

Quote from Bush speech:

" Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected -- along with mortgage payments they could not afford. As a result, many mortgage holders began to default.

These widespread defaults had effects far beyond the housing market. See, in today's mortgage industry, home loans are often packaged together, and converted into financial products called "mortgage-backed securities." These securities were sold to investors around the world. Many investors assumed these securities were trustworthy, and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.


The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt. "

[audreyh1]

Quote:

Originally Posted by . . . Yrs to Go In a financial crisis, everyone is a socialist. (kind of like there are no atheists in a fox hole)

Yes, I too was amazed last night to hear Larry Kudlow blithely declare that it's OK for government to step in and intervene and "bail out" in "free markets" every 50 years.

Can't believe that anyone can still declare that with a straight face to let the "free market" work. Obviously free markets can go very unstable with amazing regularity and while "creative destruction" may be some kind of ideal, the tsunami can get big enough to virtually ruin economies for 10+ years. The 1800s was full of such global financial disasters.

It's pretty obvious from the past 10 years that markets have to be meaningfully regulated to operate rationally. The paradox - for markets to truly operate "freely" there has to be transparency which requires stringent financial reporting, and some reasonable constraints/limits.

Audrey

P.S. I forgot where this link was posted, but how the current amount of leverage was ever allowed is beyond me. The Big Picture | How SEC Regulatory Exemptions Helped Lead to Collapse

[Helena]

Quote:

Originally Posted by dex The issue is liquidity.

Deflation

The government wants to spend its way out of it.


~

[Brat]

DH, who is absolutely a-political, said that Bush looked sick (or grim).

I feel like I have been mugged by guys in pins-triped suits, "Your money or your life!"

[Running_Man]

As is pointed out in this thread, history is replete with bad financial happenings that effect the economy for 10+ years. Yet the economy continued to grow over that time and standard of living has steadily improved. The likelihood that 3 Federal employees have developed the answer to avoid that and provide comfort for all is very low. Standing in the way of natural order is sure to cause unintended consequences.

These are the same people who saw no problem 18 months ago when it could have been addressed. As a matter of fact a few months ago Paulson was claiming the mere possibilty that the US Government would take over Fannie & Freddie would be taken over would provide confidence to solve problem.

[dex]

Quote:

Originally Posted by Running_Man As is pointed out in this thread, history is replete with bad financial happenings that effect the economy for 10+ years. Yet the economy continued to grow over that time and standard of living has steadily improved. The likelihood that 3 Federal employees have developed the answer to avoid that and provide comfort for all is very low. Standing in the way of natural order is sure to cause unintended consequences. These are the same people who saw no problem 18 months ago when it could have been addressed. As a matter of fact a few months ago Paulson was claiming the mere possibilty that the US Government would take over Fannie & Freddie would be taken over would provide confidence to solve problem.

all true
more ...if true - bad
China banks told to halt lending to US banks-SCMP | Markets | Markets News | Reuters
BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.
The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.
"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.
A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills)

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