As a concrete example, I am in the process of selling some real estate to a developer who plans to construct a multi-use facility (offices, retail, condos). If the banking system seizes up, there will be no financing for the project, and the sale will not go through. This will cost me the money I would have made. I had intended to use that money to buy a house. So the theoretical seller of that theoretical house doesn’t have me as a buyer. And whatever that theoretical seller might have intended to do with the money when s/he sold a house to me doesn’t get to do that, and so on, and so on. An echo effect.
Aside from that, the construction jobs that would have been created on the project will die on the vine. The retail anchor of this project (a national drug store chain, I believe) will not be able to open its new location. The jobs that new location would have created go by the wayside. And all of that echoes through the economy.
Now multiply those effects by the thousands upon thousands of such projects that are on the boards nationwide, but which will be stopped in their tracks by a banking collapse.
President Bush is going on TV tonight to explain the bailout (I hope). Maybe he’ll explain what will happen if the bailout isn’t approved? I wonder if he’ll tell the truth.
Who came up with a figure of 700 billion? I bet they really only need 400 billion and they figured they’d use 700 billion so they’d have some extra to play around with.
What do you mean by “if the banking system seizes up”? If banks lose money because they are holding on to “toxic” assets, will they not have money to finance the project? Or will they not finance it because they will tighten their lending rules? Or other?
Shouldn’t financing your project stand on its own merit, as long as the bank has cash to lend?
You know, this is the kind of issue that divides the business conservatives from the ideological conservatives. Wall Street wants this bill and now, but the FReepers are calling it the first step to socialism.
The timing is just too good. A last ditch effort to loot before Bush is gone. we know the system has been slanted for the rich for 8 years. Now one more really big killing before they go.
They are supposed to buy back the bad loans that made the looters rich. I would prefer they went directly to the home owners and renegotiated. This does not do a thing except rescue bad business decisions. It helps those who looted and does not fix the foreclosures. I thought the problem was the foreclosures. Apparently we have to save banks by giving them many millions of tax dollars. They of course are home office located in a tax shelter like the Caymans. It just wouldn’t be right to ask them to pay taxes too.
Morally, yes, it might be better to help out mortgage holders directly. But this is not a moral debate, it is a practical debate. And the very practical problem we are facing is that our nation’s banks are about to have a crisis of illiquidity. Helping individual mortgage holders won’t solve that problem, at least not quickly enough to stave off disaster.
This is a really peculiar position that I’m finding in lots of folks who’ve spent the last several years saying that the economy is in the crapper. It’s some sort of contrarian overswing.
That said, the one thing we can be sure of is that the Bush economy never landed on the Moon!
I’m pretty ignorant about most things economic. (Of course, what little I remember from my short-term tenure as an econ undergrad suggests that EVERYONE is pretty much ignorant about the economy - it just works out that some times some folks’ prediction seems correct, and other times the other folks’ predictions seem to fit facts better!)
Just wanted to toss out an anecdote. I’ve got a buddy who is a pretty heavy financial player. Used to manage a hedge fund, now raises cash for private ventures. Stuff I can only comprehend on the must superficial level. And I know he is a big fan of the free market.
In a discussion the other day he said, “Let them fail. … No company is ‘too big’ to fail.” Expressed his opinion (which I interpreted as hyperbole) that we were crossing the line to where the “markets” were no longer “free.”
Well if he is not lying now, Paulson. Bernanke and Bush were lying when they said there economy was an solid foundation and not to worry. They did that over and over this year. A matter of a couple of weeks ago in congressional testimony, they assured us all is well. Were they lying then. ? You can not have it both ways. There was not a light switch that flipped turning the economy into a disaster overnight. They have shown they will lie. it is up to us whether we trust them. I have no reason to. I am a skeptic.
They are salesman telling you the deal on the car is a one time only and you must sign now. They are the high pressure salesman going to talk his boss into the best deal because they are really on your side. These tricks do not work on me.
OK, question… it’s not really hard to understand that the dollar will lose value as a result of the bailout package… but I don’t see how you arrive at depression of oil prices. Crude jumped $25 a barrel when the bailout was announced, supposedly from currency effects alone as the forecasted value of the dollar went in the tank. Why would oil prices (in dollars) go down? I’d think they’d go up.
It appears to me that they seem rather focused on the next 6-12 months. Is this a proper perception? And if so, why are they focused on the short term instead of 6-12 years? People should be asking what is better for the long term. Not what’s better for the stock market over the course of the next year.
So, what you are saying is that it would be better to have double digit unemployment, deflation, failed businesses, many more forclosures and such (and lots of other bad stuff) in the short term so that things will be better 6-12 years from now? I can certainly understand this point of view, but just checking that this is what you mean.
How willing do you figure the American people are going to be for such a trial?
There’s really no “win” in this situation, not for the “common people”. If we bail them out, the government is going to struggle for years and possibly decades with the additional debt on top of the debt that’s been accumulated through Bush’s non-tax-and-spend-like-a-compulsive-shopper administration.
If we don’t bail them out, we could grind into a depression that will last for years (and possibly decades).
The only people who really win in any of these scenarios are the officers of the failed banks if we go bailout. I’m having trouble finding the basic human charity within my soul to feel bad for them if we don’t bail them out and they end up on the street eating out of dumpsters, frankly. As far as my life goes, I have trouble figuring out how the two scenarios are really any different from each other.
