Perhaps Paul Wolfowitz can be lured away from his present position to take charge. That would change my level of confidence, albeit slightly.
That’s not what I’m suggesting at all. The main emphasis on the doom’n’gloomers seems to be stock market prices falling. Why should we care if stocks fall 10-20-30 percent if things will ultimately be healthy in the long run?
Paulson/Bernanke in their testimony said that the if credit markets seize up it is entirely a psychological condition - financial institutions being unwilling (not unable) to lend to one another. How likely is that really? If no one’s lending money, someone who isn’t stupid and looks at long term income will eventually and make a killing on it. And others will follow. It doesn’t add up me - though I’m no banker or economist…
Politicians say the emails and calls from constituents is way ,way against it. Some have yet to get a call backing it. The people smell a rat. The dems cave over and over. This is their time. If they buy the problem, they should cut Paulson and Bernanke out of it. They will be gone soon anyway. We need a financial boss beyond the politicians. Some respected college professorial type with clean hands. Not Paulson who accumulated 700 million dollars doing the deeds he now wants to fix.
He wants to give the money to the companies who got rich off it. That is wrong.
If no one’s lending money, then no one’s making more money on new loans. Sooner or later they will get hungry enough to lend to those who are still strong enough to still be around.
If they have no liquid capital (which looks to be the crisis shaping up), what exactly do you figure they will lend? And why would they risk what they have in such a climate? Did no one every read the history of what happened in the Great Depression?
-XT
If they have nothing liquid to lend aren’t they over-leveraged and need to scale back anyway?
My personal point of view exactly. I will not make in my lifetime combined make the amount of money ONE of these executives make in a single bonus, let alone their golden parachute. I agree with the poster that said the problem should be fixed at the bottom not at the top. If people are able to renegotiate their loans, and make their payments, the banks will become more liquid. Why should someone like me who didn’t take the risks I wasn’t prepared to take bail out those who did take the risk?
Well…yeah. That’s kind of why it’s a bad thing. Businesses can’t expand. New Businesses can’t form. New contracts can’t be leveraged as there is no credit to bring on new employees. It’s a downward spiral…at least in the short term. Eventually we’ll hit the bottom, liquidity will return and growth start up again. The problem is getting from where we are now to there, which could take years and cost the people…a lot of misery and suffering.
A steely eyed and stone cold economic conservative would basically just say it’s the price we need to pay to adjust the market, and we’ll just have to get through it. I’m guessing that a lot of folks who are waving their hands about bailing out the ‘rich bastards who put us here!’ don’t realize exactly what they’d be buying if the government DOESN’T do this bailout (btw, looks like they decided to do it), because they have been told that this bailout is all about saving rich fat cats on Wallstreet…instead of the reality we were staring down the barrel of.
Of course, they’ve also been told it’s all the fault of the evil rich (with a side helping of Republican deregulators), so John Q Publics views on all this are a tad bit skewed…as is John’s vision of what the real problem is and what cliff we were all (and still are) staring over…
-XT
You’re losing me here… IF they’re over-leveraged they need to scale back. You’re telling me EVERY bank is over-leveraged and no one will be able to get a loan unless banks over-leverage? I don’t really don’t care about who says what - I care about the truth and reality. To me, if the majority of banks are over-leveraged - then we’re pretty well fucked no matter which way you slice it. Are you contending that the majority of banks are being run irresponsibly right now? I can see how a certain percentage might be… even perhaps a large share of the publicly traded ones (because of the neccessity to maintain profit growth to maintain stock prices), but the smaller and medium sized and large private banks and credit unions? Surely someone or some creative group of CUs or banks will be able to step in and provide loans to businesses and make a killing on this ‘crisis’ don’t you think?
What in fact is the reality that we’re staring down the barrel of? Have you figured it all out in the time since you started this thread with an OP asking what was going to happen?
I’m not saying that I know, exactly, I’m just saying that the people who are telling us we have to do this bailout immediately are the same people who told us not to panic because the fundamentals of the economy are strong, that we had to invade Iraq immediately because the Iraqi government recently sought significant quantities of uranium from Niger, etc. Yes, something serious is going on, but is Bush the guy you’re going to listen to when he tells you the sky is falling and we’d better do something quick?
I’m trying to figure how you reckon that the issuance and securitization of bad loans, facilitated by a lax regulatory environment, is the fault of anybody besides the evil rich and the Republican deregulators. I for one am not one of those who borrowed idiotic amounts of money and can’t make my house payments, but they’re coming after me (metaphorically) in the form of higher taxes to bail these idiots out, and I may lose my job due to this crappy economy. Maybe, just maybe the prevailing view is correct on this one? :dubious:
I’m saying that this is one of the possible scenarios, yes. Perhaps not ‘EVERY’ bank would be…but those (few) that aren’t are going to be unwilling to risk their capital very much, especially with the possibility of escalating failures and cascading problems.
I’m no financial guru either…I’m getting this from discussions with some of my financial savvy friends who have been VERY worried the last two weeks.
It has nothing to do anymore with how well they were run. Banks who had nothing to do with any of this are being sucked into the vortex too. Do you think they are immune or something? Everything is interconnected…not just in the US but internationally. Once we start to slide downward it won’t matter if Your Local Bank and Trust was run right, had nothing to do with bad loans, etc…they are going to be caught in the same situation.
-XT
I dunno if the little banks can do it all.
Let’s say Congress decides to open up ANWAR to oil drilling.
Exxon decides to bid on the leases. Exxon is going to have to come up with many billions to pay for the leases, to pay seed money for all the construction and drilling contracts, pay for all those new employees salaries and set up their benefits packages with the various third party providers, pay for insurance on everything, etc.
Exxon doesn’t have those billions laying around some room, Scrooge-McDuck style. They will need to borrow it while they figure out how to free up that much money from their currently held assets.
The San Diego Teacher’s Credit Union ain’t gonna be able to loan that much… heh. Sure, a confederation of small banks might be able to get together and pool money, but that might turn out to be a big headache itself.
If they have capital (and they should if they are being responsible) then how is it going to affect them?
Individually, no, but if 5-10 pool their capital and share the profit, they sure as shit could… And to brush it off as ‘too complicated’!? seriously? from the industry that brought you credit default swaps!?
5 to 10 banks getting together and hammering out a deal (on who’s in controlling power (to run oversight on Exxon’s spending of the dough and veto things Exxon tries that’s not explicitly covered in the loan documents), who’s money goes where (I listed a bunch of different things that Exxon will need to raise the money for), and all that) will sure as shit take a whole lot longer than it would take a single superbank to get it’s act together and give Exxon the loan.
I would imagine it took more than three months to work out all the kinks in credit default swap schemes.
Seriously? You come up with an organization to oversee it all with a rep from each bank - set the profit at whatever percentage of the capital is contributed in. All it takes is people willing to deal. And if there’s money to be made, and no one else filling the need, you can bet banks and credit unions are going to be willing to deal.
If there is ample room for the small financial institutions to step up and pick up the slack (in making huge dollar value loans), then why all the noise from Capital Hill?
Do you feel that the politicians are just protecting their lobbyist buddies?
(You may have already stated that. My apologies if I missed it.)
I really don’t know. I hope not, but I wouldn’t rule it out. What I do know is that every ‘crisis’ that we’ve had in the past 8 years that we absolutely needed congress to act quickly on turned out to be a ploy to get favorable legislation on the president’s desk. And it wouldn’t just be the lobbyists that they’re protecting, but practically every big-money contributor. There are a lot of wealthy people who have an awful lot of money in these investment banks.
They keep bringing up the stock market, 401k’s and pension funds to scare the general public, but those aren’t what’s in danger here… directly anyway. Those aren’t going to be what receive the majority of the benefit here. It especially won’t help these things if the a huge bailout contributes to the dollar going further into the toilet. Long-term the market should weather this. America is still home of innovation and the uber-productive worker. The bottom line is it still just doesn’t add up to me.
Expected reduction in demand. A major recession, which will spread, would cut energy usage which should cut prices. Some of the recent decrease was from a strengthening dollar, but a lot was from the expectation of a decrease in demand.