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September 29, 2008

The Bailout, This Thing Is Just Terrible…

by @ 2:16 am. Filed under Business, Nuts on Parade

An article about the big mess: Crisis Hits Europe’s Banks As U.S. Seals Bailout Deal

Never mind that most Americans are against it, don’t go thinking your thoughts on this matter any. They’re going to ram this through and you can shout in the streets all you want, they’ll either ignore it or just lock you up for getting in the way.

Some commentators have mentioned that this is the biggest government intervention since the Great Depression, but at least in the past the lawmakers allowed a depression to occur without trying to jump in ahead of time and take over. They allowed the market to do some self correction instead of just running to nationalization as the cure early. As more and more of America is under federal control, beware of fascism.

Here are some quotes from the article above and my thoughts on it.

The White House and congressional leaders agreed on a deal to authorize the biggest banking rescue in U.S. history.

The $700 billion program would effectively nationalize an array of mortgages and securities backed by them — instruments whose deteriorating value has clogged the nation’s financial system.

The government taking over large portions of America’s financial infrastructure. Seems that would limit the independent flow of commerce. Instead of the market correcting, a prop of magic money is being put under the mess. Mess that should be allowed to depress, fall in, so it might correct as a market should. Instead, what has failed is being failed-up!


The bill leaves many mechanics of the operation up to the Treasury. Among these are the crucial issues of how the U.S. government would decide which assets it will buy and how it would decide what to pay for them. The legislation leaves the Treasury 45 days to issue guidelines on those procedures. The bill awaits votes in Congress starting on Monday.

So basically this all hit the skids with the Treasury watching and now the Treasury, which basically works in the interests of bankers is going to write the rules. Certainly the Treasury works in the interests of bankers, because they wanted bail out and the Treasury ran to give it to them. This all was not inspired by consumer groups.


From big Wall Street houses to small community banks, executives have expressed an interest in signing up for the bailout. But some have said the extent of their involvement will depend on critical details.

Money hand outs, just what you don’t want to give a financial failure, more money.


The political fallout from the bailout could be substantial, given the enormous expenditure of taxpayer money. Some polls show wide opposition. But the legislation includes provisions designed to guard against ultimate losses for the government.

What polls don’t show wide opposition, if just “some” polls show wide opposition? Polls of bankers?!!!

Guard against losses, oh yea, right. These bad loans were supposed to be guarded against loses before this by their own insurers, but that didn’t work out, did it? Now we’re supposed to believe it’s going to work well with the government doing it 🙄 .


Sellers of assets could include a broad range of financial entities — not just banks but also credit unions and pension funds. The assets offered to the government must have been originated or issued on or before March 14, 2008.

Basically anybody who proved to be bad with lending is going to be eligible for receiving what you don’t give a financial failure, more money.


The plan would impose some curbs on executive compensation at firms that sell assets to the government. These include a ban, for those that sell a large amount of securities to the U.S., on creating new “golden parachute” payments to departing top executives. Companies also would have to have provisions to “claw back” past bonuses found to have been based on misleading financial statements.

Now this is one of the biggest crocks of the whole thing. The supposed ban against “golden parachute” packages. I knew this was going to be BOGUS. Because government can’t go changing existing CEO contracts. They are going to stop the creation of NEW packages. But THE GOLDEN PARACHUTES ARE ALREADY IN PLACE AND READY TO BE DEPLOYED! Executives who go now, will leave with all the terms of the deal they signed on with, including their already established packages. That new big packages won’t be made means nothing, the failures will get theirs from already existing deals. And so long as they report how bad of a failure they were without making up the figures they’ll get more money and their already existing “golden parachute” will be well funded. If these companies were allowed to go under, there would be no money for the existing “golden parachutes”.


The Treasury would receive warrants giving it the right to acquire nonvoting common stock or preferred stock in firms benefiting from the bailout. The program would be subject to oversight that includes a bipartisan committee and the Government Accountability Office. The GAO would have an office located within the Treasury Department.

Nationalization, the government owning companies and if the companies continue to fail do you think the government level of influence will decrease? If the company is found to be doing something wrong (and so many companies are doing something wrong) do you think government influence will decrease? This is the start of government’s flat out taking over of corporations.


One likely method of purchasing and pricing assets is a reverse auction. In this, firms would offer to sell securities at given prices, and the Treasury could buy the least expensive on offer. Institutions would presumably offer to sell at prices high enough to alleviate their woes but not so high they’d be passed over in favor of lower-priced offers.
….

And if everybody is padding what they want, oops I mean need, padding it a some, then the whole process is inflated.


The agreement came together only after concessions on all sides. Democrats backed down from a proposal to let bankruptcy judges alter the terms of mortgages, and from another that would have steered government profits from the package to affordable-housing programs. The Bush administration, for its part, agreed to much broader executive-compensation limits than it originally envisioned, among other things.

Here’s yet another reason I won’t be voting for McCain or Obama (or any of the others I know of that are running for President). Notice Obama and Democrats talk about doing things for those who are not well off, but they simply gave to the bankers. Notice McCain and Republicans don’t favor a free market, although they talk about favoring such, they favor giving to bankers. They all can come together, to give bankers money, the worst bankers, the biggest failures.

Well this all will likely lead to more inflation, possibly even stagflation and given failures are being propped up with money the government has printed and taxpayers can’t afford the government’s bills. This will likely lead to a future crash that’s even bigger than would have occurred now.

Kicking the can up the road, only makes it more dirty.



11 Responses to “The Bailout, This Thing Is Just Terrible…”

  1. Albertadude Says:

    IC, since I am admittedly limited in economic matters, what should be done?

    I know everyone seems to have a different opinion….

    Outside of a Massive Revival sent from the Lord to North America, what do you think the Federal Govt. should do?

    Do we just let Wallstreet sink? Wouldn’t that set off a worldwide depression?

    Or even if we bail out, a worldwide depression is coming regardless?

    I do know one thing, we live in dangerous yet exciting times ….when I read Revelations, I get chills…

    Take care

  2. IndependentConservative Says:

    Albertadude, economically speaking it would have been better to yes, let some things sink and let whatever global impact occur. The US economy would have been able to possibly rebound from whatever depression without continually building up this debt bubble. That’s how a real “free market” would be allowed to work.

    Instead, lawmakers have sought to avert the market correction (otherwise known as a recession). So you have an economy with an inflated false bottom. Piling debt. You can see some of it explained in KyleAndrews’ earlier comment.

    There’s a real fundamental principle that is being broken in this “bailout”, which is you don’t give your worse lenders a “bailout”. They made the loans and passed them around to each other. Knowing the risks before they did it. Knowing voices have been warning them about it for a long time. That does not deserve reward in them staying on “Wall Street”.

  3. Albertadude Says:

    So then you must agree with today’s action not to pass the bailout plan right?

    Dev

  4. IndependentConservative Says:

    I most certainly do!

    Problem is, those who desire it are going to keep at it till they get it. Maybe even let a small depression set in, to try and pain more citizens into supporting giving failures more money. But so far many Americans realize it’s a bad idea.

    Either there can be some big pain in some areas now, or worse later. The politicians are pushing to have worse later, they’ll take what they can get for now.

  5. Albertadude Says:

    So IC, if we do not bailout Wallstreet, can the economy come back or are we headed to a massive depression or perhaps a hard recession?

    Good Lord…these are incredible times!!

    Doesn’t Scripture speak about our money becoming valueless also?

    Dev

  6. IndependentConservative Says:

    Without a bailout, a depression is very likely. Difference is, a depression now would be shorter than what’s coming later after they pass this package.

    Yes one thing is for certain, scripture will be fulfilled.

  7. stan Says:

    Command those who are rich in this present age not to be haughty, nor to trust in uncertain riches but in the living God, who gives us richly all things to enjoy.

  8. johnkaniecki Says:

    IC,

    Hi hope you are well.

    Do you really believe in the free market theory?

    Love,

    John

  9. IndependentConservative Says:

    Are you asking do I feel America should fully apply the free market theory and allow companies and banks to charge any rate they desire at any time for anything? I do not feel that should be done. I’ve made it known, I’d prefer that the line once held, that kept credit card companies from going crazy with their product had been maintained. I’m not promoting a government “ban” against any charging of interest, but I do feel it would have been better for governments (in the case of credit cards it was certain state governments) to hold the line on banks charging too much interest.

    I’ve also made it known, I don’t like seeing people pressed to take money they can’t really afford. I don’t feel government would ever be able to “ban” that sort of thing and I’m not seeking for them to. If tighter controls on the amount of interest that could be charged were in place like in times past, this sort of thing would never be going on to begin with.

    I’m also against collusion in price fixing, that’s fraud and not an open market system.

    But I draw the line with what I’ve noted above. I think there should be tight controls against charging high interest rates, against fraud and that’s about it. I do feel what’s left “free” beyond that will work it’s self out.

    I do feel the full “free market theory” does work, but I don’t feel it’s application to the fullest extent would be wise.

    I consider myself a person who favors free markets, but I do make it known I say that with certain controls, so my view of it is not really the fullest pure definition of “free market”.

    Now with everything I’ve said above, I’m speaking about markets within America only. I’m not at all for full international free market action. I think that has to be well controlled and I’m no fan of many international trade agreements America has setup.

    Regarding this issue with the banks, I do feel they need to be allowed to freely fall. I see no value in giving money to proven failures. Let them die, lets take the pain and allow the market to correct.

  10. stan Says:

    There has to be something said for the individuals who knew up front that they could not afford a home they were attempting to buy. They were willingly participating in the fraud that the banks were fronting, all on the premise that the government (taxpayers) would back the loan anyway. Their name was Legion, for they were many.

  11. VanceR Says:

    John, There hasn’t been a free market in this country since the late 1800’s. With central banking comes central planning which is one of the planks of Communism by the way. One of the biggest ironies of the past 20 years or so is that this country has become socialistic while purporting to under the influence of conservatism. Go Figure..

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