Senate hearing on the bailout

cuttlefish · 24 September 2008

Was interesting to hear Paulson and Bernanke speaking on the fly. I'm not convinced anyone's done the numbers and the skeptical part of me thinks it will be interesting to see how quickly they blow the 700 billion and come back for more - its not clear how they came up with the figure. It'll be interesting to see whether they can actually raise the money as well and what price they'll have to pay for it in terms of interest. My understanding is they have to issue debt to raise the funds and someone has to buy it (private capital, foreign governments etc.).

Some of the senators were a bit out of their depth but there were some good questions in there as well. Paulson's asked for some pretty sweeping powers and indeminities. You also have to wonder how the CEO of Goldman Sachs from 1999 to 2006 can claim not to have been part of the cause of the problem or been aware of the problem. And I can also understand there is skepticism about now giving him 700 billion and pretty wide ranging powers to help bail out banks and investment banks. A lot of rhetoric about controls, oversight and transparency but no substance in the bill proposal as yet by the sounds of it. Its also interesting that Paulson will be gone again early next year and there will be a new secretary coming in.

It still looks like a badly managed business not facing up to reality to me but time will tell I guess.

noirua · 24 September 2008

cuttlefish said:
Was interesting to hear Paulson and Bernanke speaking on the fly. I'm not convinced anyone's done the numbers and the skeptical part of me thinks it will be interesting to see how quickly they blow the 700 billion and come back for more - its not clear how they came up with the figure. It'll be interesting to see whether they can actually raise the money as well and what price they'll have to pay for it in terms of interest. My understanding is they have to issue debt to raise the funds and someone has to buy it (private capital, foreign governments etc.).

Some of the senators were a bit out of their depth but there were some good questions in there as well. Paulson's asked for some pretty sweeping powers and indeminities. You also have to wonder how the CEO of Goldman Sachs from 1999 to 2006 can claim not to have been part of the cause of the problem or been aware of the problem. And I can also understand there is skepticism about now giving him 700 billion and pretty wide ranging powers to help bail out banks and investment banks. A lot of rhetoric about controls, oversight and transparency but no substance in the bill proposal as yet by the sounds of it. Its also interesting that Paulson will be gone again early next year and there will be a new secretary coming in.

It still looks like a badly managed business not facing up to reality to me but time will tell I guess.

Very interesting, thanks.

I remember the Hong Kong Government bailing out their stock market about 7 years ago by buying shares in all of the major and important companies. The result was the index recovered rapidly despite all the murmurings.
Later on, when the market recovered, they made very hefty profits.

The USA's position is quite different, but is still investing in mortgages to take the weight off the banks. Later on, perhaps very much later on, these will prove far more lucrative than some imagine.

The Democrats will spend their time getting guarantees for this package. They dare not vote against it though.

Calliope · 24 September 2008

The Senate (and the taxpayer) are faced with a nasty conundrum. Should they;

Bail out the irresponsible lenders, or,

Bail out the irresponsible lenders and the irresponsible borrowers, or,

Do nothing, in which case the taxpayers will not be paying taxes because they will have no income.

njc.corp · 24 September 2008

Calliope said:
The Senate (and the taxpayer) are faced with a nasty conundrum. Should they;

Bail out the irresponsible lenders, or,

Bail out the irresponsible lenders and the irresponsible borrowers, or,

Do nothing, in which case the taxpayers will not be paying taxes because they will have no income.

very good thoughts-

let it crash-

this is a gamble-what happens if they aprove the loan and it backfire's?

if their is 3 risk's already why do u want to take on one more?

thank god i dont live in america-

they are lazy and irresponsible people-they have always been-

always looking for handouts-

no bail out-

let history take it's course so they can learn from it again-

Thanks

Nick--

CAB SAV · 24 September 2008

I'm sure there will be a bailout, the filthy rich will take care of their mates, Buffett will make millions and the middle class will disappear. Rich class will run a country of growing poorer class. Democracy will be gone and replaced by Plutocracy.

njc.corp · 24 September 2008

CAB SAV said:
I'm sure there will be a bailout, the filthy rich will take care of their mates, Buffett will make millions and the middle class will disappear. Rich class will run a country of growing poorer class. Democracy will be gone and replaced by Plutocracy.

well another good point-

for buffet to come out and buy some of goldman-well maybe its a good time to buy something of value for the long term-

the road to recovery is going to be long but for their sake i hope its not longer then expected-

Thanks

Nick--

Green08 · 24 September 2008

I watched part of it until I fell asleep.

Agree the questions were good and direct the responses from Paulson and BB were so vague and repeaticious. Paulson always looks as though he is jumpy and on edge - I just can't get the feeling out of me this is to save himself and his pals.

I do notice alot of "This is best for the American home owner and the financial stablity of America"

HELLO - you have deceived the rest of the world and taken our money too! The Life Insurance and Super tied to AIG. Englands demand from Lehmans of $8 Billion to Lehaman NY. Considering Paulson was CEO of Goldman Sachs for sometime he MUST of known what was going on his last year there receiving $37 million in bonuses. If he was geniunely concerned for the toxic waste he could bery well have instigated the government to put in regulations years ago. But just sat there. We may never be able to trace the amounts of money 'passed under the table' to keep this crisis from blossoming. I don't trust any of them - 3 pages!!! what a joke

Julia · 24 September 2008

cuttlefish said:
Was interesting to hear Paulson and Bernanke speaking on the fly. I'm not convinced anyone's done the numbers and the skeptical part of me thinks it will be interesting to see how quickly they blow the 700 billion and come back for more - its not clear how they came up with the figure. It'll be interesting to see whether they can actually raise the money as well and what price they'll have to pay for it in terms of interest. My understanding is they have to issue debt to raise the funds and someone has to buy it (private capital, foreign governments etc.).

Some of the senators were a bit out of their depth but there were some good questions in there as well. Paulson's asked for some pretty sweeping powers and indeminities. You also have to wonder how the CEO of Goldman Sachs from 1999 to 2006 can claim not to have been part of the cause of the problem or been aware of the problem. And I can also understand there is skepticism about now giving him 700 billion and pretty wide ranging powers to help bail out banks and investment banks. A lot of rhetoric about controls, oversight and transparency but no substance in the bill proposal as yet by the sounds of it. Its also interesting that Paulson will be gone again early next year and there will be a new secretary coming in.

It still looks like a badly managed business not facing up to reality to me but time will tell I guess.

Cuttlefish, all your above points were made by Prof. Jeffrey Sachs in an interview onRadio National this morning. He said "they simply don't have a plan". The written bail out 'plan' consists of ten paragraphs. He also echoed your scepticism about Paulson's being the architect of any bail out, given his obvious implication in the causing of the whole mess.

pepperoni · 24 September 2008

The $700b is just to pay the many $50m executive salaries, a few $300m golden parachutes and thousands of $1m bonuses.

But the continuation of the consumption of the super rich will keep the economy health for years to come. We have done the numbers. Trust us.

Junior · 24 September 2008

njc.corp said:
thank god i dont live in america-

they are lazy and irresponsible people-they have always been-

always looking for handouts-

no bail out-

let history take it's course so they can learn from it again-

Thanks

Nick--

Hmm, that's a sweeping generalisation. Plenty of those types in Australia too.

cuttlefish · 24 September 2008

Julia said:
Cuttlefish, all your above points were made by Prof. Jeffrey Sachs in an interview onRadio National this morning. He said "they simply don't have a plan". The written bail out 'plan' consists of ten paragraphs. He also echoed your scepticism about Paulson's being the architect of any bail out, given his obvious implication in the causing of the whole mess.

Maybe he reads ASF! Actually I think anyone watching it would draw similar conclusions - it appeared very much a case of give us a lot of money and trust us to do the right thing. I don't think they have that much choice at this juncture but were I a US senator I would be asking a lot of questions as well - particularly about how they came up with the 700 billion figure in the first place.

wildkactus · 24 September 2008

Read in the Paper (scmp) about where this 700b fits into what has already been spent, it gave a table view and it had listed about 1.1 trillion in spend so far (not including this bill). the articule even hinted at it was still a long way short.
there where a lot of small lots that make up a large chuck of change.

It will be interesting to see the bill in its final form, how may changes / amendments it has, and to see if it turns into a christmas tree bill.

Green08 · 24 September 2008

on CNBC they had a guy on who made a very important point.

This package of taking on at least 1 million homes and holding them to maturity has an inherent flaw. You basically become the landlord so any broken pipes, smashed windows, etc need to be fixed - more money - to keep the value of the property. Your relying on the resident to do all this when being strapped for cash. With some of these mortagages on 30 year terms that is alot of maintenance to the keep value and make a profit.

He made other points with the RTC which went over my head

fimmwolf · 24 September 2008

Paulson's plan doesn't help the people struggling to pay their mortgages actually pay them. Their mortgages will remain intact with their respective banks.

It doesn't offer them (joe citizen) part ownership of the corporations they are bailing out. Yet they expect every man, woman and child to fork out $2000 to pay off the bad assets held by the banks.

He (paulson) expects to be able to spend the money without review.

"Decisions by the Secretary pursuant to the Authority of this Act are non-reviewable and committed to Agency discretion, and may not be reviewed by any court of law or any administrative agency''

What a farce!

Green08 · 24 September 2008

Apparently Paulson and BB have information on what would / could happen though they don't want to disclose it as they fear the markets will panic...I didn't realise that they had crystal balls to determine exactly what would happen. If they have information (which is I think is dubious) announce it and let the people decide.

Julia · 24 September 2008

fimmwolf said:
Paulson's plan doesn't help the people struggling to pay their mortgages actually pay them. Their mortgages will remain intact with their respective banks.

It doesn't offer them (joe citizen) part ownership of the corporations they are bailing out. Yet they expect every man, woman and child to fork out $2000 to pay off the bad assets held by the banks.

He (paulson) expects to be able to spend the money without review.

What a farce!

Yes, it is indeed. And hopefully the Democrats will continue to refuse to be bulldozed into agreeing with the Bill until some of these concerns are addressed.

cuttlefish · 24 September 2008

fimmwolf said:
Paulson's plan doesn't help the people struggling to pay their mortgages actually pay them. Their mortgages will remain intact with their respective banks.

It doesn't offer them (joe citizen) part ownership of the corporations they are bailing out. Yet they expect every man, woman and child to fork out $2000 to pay off the bad assets held by the banks.

He (paulson) expects to be able to spend the money without review.

What a farce!

I don't see any reason why the government should be helping people that can't pay their mortgages any more than they should be helping investment bankers. If someone takes out a mortgage and can't pay it - then unfortunately in a free market system they have to bear the consequences.

The reality is that people being irresponsible and taking out mortgages that they had no chance of being able to pay back is what created the mess in the first place - along with the greedy sales people that sold the mortgage to them regardless and pocketed the commissions - but at the end of the day the consumer is responsible for their own decision to take the mortgage out in the first place (or the equity loan or the credit card or the student loan etc. etc. etc.).

The ideal would be that they wouldn't bail anyone out at all. They may have been better off letting the institutions (fannie, freddy, AIG etc.) and the banks that are in difficulty all go under but they would still have had to capitalise the FDIC to cope with it or face almost certain civil unrest.

The bad subprime paper would still have existed but would have been sold by administrators at real market value to private and foreign investors. End result possibly similar to the outcome of the current bailout - though probably far more difficult to control. It would also have likely created a very big confidence crisis in the USD which would have potentially created a new host of problems.

Though this may all still be there to come and this current bailout may just be postponing the problem. It really does depend on whether they've actually run some figures and quantified the problem to come up with the $700 billion figure or are just flying blind.

Macquack · 25 September 2008

cuttlefish said:
The reality is that people being irresponsible and taking out mortgages that they had no chance of being able to pay back is what created the mess in the first place - along with the greedy sales people that sold the mortgage to them regardless and pocketed the commissions -

....and the chief regulator at the time, Federal Reserve Chairman - Alan Greenspan.

If the proposal is to bail out wall street and do nothing for main street, then
it would be only fair that Greenspan be subject to a pubic flogging to entertain the masses.

2020hindsight · 25 September 2008

Bush to address the nation in "a couple of hours"

http://www.aol.com.au/news/story/White-House-Bush-mulling-speech-to-nation/982781/index.html

With a financial rescue plan facing a tough sell in Congress, President George W. Bush has scheduled a major address Wednesday that he hopes will convince regular Americans of its relevance and "get this over the goal line" with U.S. lawmakers.

The address, to be delivered from the White House's grand East Room, is to be 12 to 14 minutes long, White House press secretary Dana Perino said. Bush last gave a prime-time address to the nation 377 days ago. This one, expected to be carried by all five major television outlets, could be the last of his presidency.

The meltdown among several financial institutions and intense negotiations with Congress over the administration's requested $700 billion bailout package led the president to return to Washington early from a three-day stay in New York. He canceled his plans to spend the afternoon in Florida raising campaign cash for Republicans.
etc

etc

Calliope · 25 September 2008

I am relying on Bird and Fortune to come up with a solution.

Senate hearing on the bailout

cuttlefish

noirua

Calliope

njc.corp

CAB SAV

njc.corp

Green08

Julia

In Memoriam

pepperoni

Junior

cuttlefish

wildkactus

Green08

fimmwolf

Green08

Julia

In Memoriam

cuttlefish

Macquack

2020hindsight

Calliope

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