The idea as I understood it was that the cash infusion will keep banks from severely cutting back on loans or being succeptible to runs. There’s nothing trickle-down about that, it’s something with a direct effect on everybody else.
The People’s Republic Party stands in firm solidarity with the working class against the running dog jackals of the Wall Street!
Here…try this link: Commentary: Bankruptcy, not bailout, is the right answer - CNN.com
Said better there than I can do. I would be interested in your comments on it.
Just a nitpick. There isn’t such a thing as a ‘Tax Earmark’. Those were tax breaks. An earmark is spending, a tax break reduces potential income.
Forgive my ignorance, but why is credit required to make payroll? Seems like if you’re paying workiers with borrowed money, you’re in a hole.
Probably half or more of all the small businesses in the US are leveraged, either for the initial purchase or expansion/equipment/whatever.
I think it has to do with line of credit…accounts receivable may take up to 60-90 days to come in, but your employees need to be paid every two weeks. Then, when the money comes in, you slam it on the LOC. Of course, if your AR is less than your AP, you’re screwed. It’s a matter of who needs to be paid vs when the money comes in.
I think.
I’ve wondered at times if a sterner response, like letting some lenders fail, might not prevent this kind of thing from happening again. But my comment was more about the analogy than the merits of the bailout itself - you’re not going to find me vigorously defending (or bashing) the bailout either way.
I knew if I waited, someone would explain it better than I could. I don’t want people to think I like this bailout. I don’t, but I can’t think if anything better right now.
I feel like a member of the Planet Express crew when they were at the lost city of Atlanta.
Fair enough but I think the analogy stands.
The government wants to pump in money at the top. This presumably will allow the banks to loan more money to people at the bottom…trickle-down.
Except there is nothing beneficial about it to the people at the bottom. Sure they can keep going awhile but part of the problem is a massive consumer debt. A consumer debt that is now not backed up nearly as well as was pretended by consumer assets.
In short the banks will minimize their losses and remain solvent or even profitable. People at the bottom are strapped with more debt than ever (they have lost a huge amount of equity). So who will the banks be loaning to? People stop buying (as already being witnessed dramatically in the car market), factories close, people buy less…looks like a recession to me.
Hence I think the bottom-up approach is better…fix the people’s asset problems. Then they can feel able to continue.
No doubt there will be a contraction in the economy but frankly it is needed. Times will be tight awhile but in the end I think we are left with a healthier economy. The placebo of the bailout will only mask the issues temporarily and let the rich get richer and screw everyone else.
Yeah. In any business, there will be a mismatch between receipts and expenditures. You need to spend money to produce goods and/or services, but you generally don’t get paid for those goods or services until later.
To close this gap, you need either a business line of credit or a decent amount of “working capital” i.e. cash lying around. Either that or suppliers who sell you stuff on credit.
Yeah. In any business, there will be a mismatch between receipts and expenditures. You need to spend money to produce goods and/or services, but you generally don’t get paid for those goods or services until later.
To close this gap, you need either a business line of credit or a decent amount of “working capital” i.e. cash lying around. Either that or suppliers who sell you stuff on credit.
But if you’re not planning to sell your house, you should be fine. Eventually the market will come back and your equity will go back up again.
We recently had our HELOC reduced. We still have more credit than what we owe, but since we’re not planning to use it, it just means we have more incentive to pay it off (which we are working on.)
What you’re talking about appears to be “keep the bubble(s)” inflated, and is entirely consumer focused. The immediate bank impact is on things like corporate lines of credit for working capital, not (normally) housing. Fixing housing assets when corporate lending is the core issue (e.g. major industrials are having trouble with short term cash) is frankly idiotic.
The most recent Horsey cartoon on this subject is pretty hysterical.
…and that’s how a bill becomes a law.
I, too, want the morons who made this happen to burn in hades. Or at least end up living under a shelled out Pinto in east St Louis.
Unfortunately I have already lost about two year’s worth of 410k contributions with plenty more to come. I could have had a real good time with that money dammit! That kind of hit starts making a $10K tax bill look pretty reasonable - if it works.
But why does the solution involve me eating some christless fat cat’s stupid mistakes? How 'bout this; have the Feds set up a commercial bank and make new loans with that $700 bil instead of paying retail for a bunch of worthless paper. If the bankers won’t do their jobs, wha-hey we’ll make loans to and from ourselves. Let the pinstriped Ponzi schemers sit on the sidelines and watch us make money til they can’t stand it anymore.
Why wouldn’t that work?
A pity we didn’t opt for the Chinese brand of socialism, at least then we’d have the pleasure of seeing a show trial, followed by the execution of the CEOs responsible for this shocking cockup.