House rejects 700B bailout plan

My congressman voted in favor of this bill, after I specifically wrote him a letter not to. We'll see who has the last laugh in a few weeks. *evil grin*
 
MiccyNarc said:
When you're flying an airplane, and the airplane stalls (the angle of attack is such that the wing ceases to provide lift), you have two options:
1. Fight it, trying to keep the plane's nose up as long as possible
2. Roll with it, let it stall and use the increased airspeed from your quick descent to recover.

If you fight it, your plane will continue to stall repeatedly, and when you finally cannot fight it any longer, your plane will drop like a piece of lead. Depending on the aircraft and altitude, this can be fatal. Where as the 2nd option almost always leads to full recovery.

Now where am I going with this? For too long we've been trying to fight to keep our economy from stalling out. Propping it up with mergers and government aid and flooding the market with excess cash. Finally, we allowed it to stall. The government decided to stop fighting it and let the market take its course. It's a really bad drop but it shows there's something wrong with the system that needs fixing. If we just kept fighting it and propping everything up, the inherent issues with our current system would lead to a permanent, irrecoverable crash.
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Mr-Fusion said:
How much of Americas fake economy draws strength from the crappy credit system? It seems silly that any economy would grow because of an unregulated chaotic financial system. New car sales going up because any hobo can take out a loan. Electronics sales going up because any hobo can take a loan. Real estate markets exploding because any hobo can take a loan. New jobs created to fill sales positions at retailers that sell aforementioned items, new jobs for builders, engineers, architects to build houses for the booming housing industry, more people in the workforce, more spending.

Growth, growth, growth all built on crap credit.
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Beautiful posts that sum up the issues nicely. Here in the UK the housing market became ridiculously over inflated, with house prices moving far beyond most peoples salaries/affordability fueled by a surge in government/bank/building societies encouragement of buy to let schemes (with the focus on property as capital investment rather than regular monthly money spinner) which meant the lower end of the market became increasingly competitive with moneyed people (rather than first time buyers) buying up the lower end of the market like crazy (because it's far easier to rent 1/2 bed flats than actual houses) and this pushed the middle and high end up in value. After all if a 2 bed flat is selling for 150K then a 3 bed house should surely sell for 250K+ right? Even though the rationale behind the demand for the latter is distinctly different from the former (house to live/raise a family in Vs flat to buy to let out).

The problem is though, fairly quickly the prices of the mid range properties start to move outside of what most working people looking to buy a home could afford based on the existing mortgage calculation system. So what do the banks/building societies do? Instead of letting the market bed down and prices drop back to an equilibrium (and making buy to let not so attractive as a capital investment meaning first time buyers are more easily able to get a foot on the property ladder), instead they start extending the terms of mortgages. They increase the amount they will lend to people based on their salary from 3.5 to 4 times, then 5 times and then to 6 times; they increase the number of years from 25 to 30 to 35 to 40. Simply making the unaffordable, affordable through contrivance and encouraging people to mortgage themselves to the hilt. Ultimately though with house prices rises outstripping inflation and salaries the market hits a point where mid market sales stall (people just can't mortgage themselves any further), and suddenly that 3-4 bedroom semi detached house your trying to sell that's valued at 450K isn't selling. So how do you sell? You have to lower your price. Ok if you can afford to do it, not ok for the rest of the people who are in the same boat but can't afford to loose 50K off the value of their property.

Plus with everyone mortgaged to the hilt inevitably some people start defaulting, and the whole house of cards gradually begins to unravel.
 
Part of me is intrigued. I've never seen poverty up close before..
 
Laivasse said:
LOL@Republican phobia of lifting a finger to interfere with the market.

And sniping at Pelosi, like Raz mentioned, wow, that was pathetic. Horrifying, when you consider the mentality behind it. We're talking about a world-changing decision over whether or not the state should step in and intervene in a failing market, and these people are basically saying, to quote Barney Frank, that "because somebody hurt their feelings, they decided to punish the country." WTF is this? Even a primary school kid would recognise that sort of behaviour as childish.

That said, like Sulkd00ds I would like to see some more detailed arguments for either side. In my case that's because, like McCain, the economy is not my strong suit and I'm finding it hard to be anything but ambivalent. In principle, the bailout seems an awful idea because essentially it's rewarding bad business practice with the promise of infinite government backing. The problem, however, is that at this point America has already come too far down a road of allowing its financial institutions to operate with recklessness and cynicism, so that if the state now neglects to keep its hands clean out of 'principle' - hoping that the markets will 'self-correct naturally' - it's too little too late by far. The consequence won't just be a few fatcats getting their just desserts, but millions of ordinary people feeling the burn as market confidence bottoms out completely.

Surely the priority now is not to maintain some kind of consistency of principle, but rather damage limitation?

...Is any part of that glaringly stupid? :angel:
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Hmmm your ideas are intriguing to me and I wish to subscribe to your newsletter.
 
I think that some people don't quite realize that the US government can turn a profit on this program if it is well written and executed. The ability for the US government to turn a profit is based upon the economy turning around and quirks in US external financial reporting. So really, this bailout program can cost more than 700 billion, 700 billion, or less than 700 billion depending on how it all unfolds (assuming Congress passes this bailout).

CptStern said:
coughIRAQcough

580B and growing
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I see, all of those Iraq real estate deals have gone bust. Makes perfect sense. :rolleyes:

Face it, you are the only person that could manage to drag the "I" word into this thread.
 
blahblahblah said:
I see, all of those Iraq real estate deals have gone bust. Makes perfect sense. :rolleyes:

Face it, you are the only person that could manage to drag the "I" word into this thread.
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context blahblahblah, really it's not hard to fit the pieces together


Koola Meena said:
Using the people's money wisely. Thank you again America
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funding for American Adventures in Iraq comes from the people's monies therefore the statement fits
 
unozero said:
wow man you really are dense the current problem has nothing to do with Iraq.
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sigh put me back on ignore ..you dont understand a word I say anyways and I'm not about to start spelling words phonetically for your benefit
 
I've personally thought that this scenario with the credit crisis has been more about perception of doom and gloom than people actually experiencing it. Case in point, the Dow Jones lost 777 points yesterday, but gained 485 points today. The market isn't reacting to actual problems with the credit market, rather the hype regarding how the media is reporting the situation.

If Wall Street can't definitively say they need a bailout, why should we give them one?
 
I'm not convinced by what he (Ron Paul) is saying. It sounds more like his political ideology as a libertarian is encroaching on his judgement as regards state intervention, since he is continuing to insist that the current situation is down to over-regulation of the market, rather than abuses by greedy/cynical elements in an under-regulated one. Again, I'm not an economist but that one's just a bit hard to swallow, and seems to fly in the face of what even the anti-bailout people here are saying.

As for what other people have said here, I agree that the bailout would just be a postponement of the inevitable. However it seems to me that that postponement is important, because regardless of how obvious it is that the American economy is going off the deep end, isn't it better to try and smooth out the descent rather that let it go into a nosedive?

Tying into blahblah's point above in a way - what is the idea of credit but an act of belief? You say you're good for the money and someone believes you. In the same way, as a business you can give the appearance of being worth a certain amount by claiming to have such and such revenue streams and assets and so forth - you might even claim to have more than you really do in order to be able to claim a fat bonus, but that would be naughty. Today, everyone believes you, so you're worth a lot of money. Tomorrow, for whatever reason, suddenly everyone thinks your assets are toxic, they don't believe the numbers, you cease to be worth jack and suddenly you're in deep pooh.

Wouldn't the bailout possibly create the illusion - ie. the belief - of liquidity long enough to prevent people doing some of the dangerous things they do when panic sets in? For instance making a run on the banks and other assorted types of wackiness. I'm fully aware that it is a work of fiction, but perhaps it's a necessary one considering that the alternative is potentially just to sit back and watch until high street businesses and banks start to drop dead from the stagnation.

Again, this wouldn't be a panacea but a damage control measure, invoked not to to save rich CEOs but the average people who would suffer should the crisis deepen too suddenly. As long as it's accompanied by discussion as to what safeguards need to be implemented to avoid this situation in future, isn't the bailout a worthy measure of last resort?

Like I say, I'm far more ambivalent and inquisitive about this one than I am clued-up, so if anyone has something persuasive, please...

EDIT: As for the DOW losing so much the other day, my understanding was that this was created by lots of people buying cheap stock under the impression that Congress would certainly vote for the bailout, then ditching it in horror when the vote came back 'no'. The improvement today would likely just be the tail end of that effect (?).
 
I think this whole mess can't be pinned to a single side. That being said Republicans have been trying to get more regulation for Fannie & Freddie for quite a while but it never happened.

Wasn't there alot of crap tacked to the bailout plan? Something about union pensions. I haven't really researched it much.
 
The senate has approved a rewrite (I guess they approved the last one), but it has to go to congress again on Friday.
 
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