I Have A Hard Time Believing. Can Someone Explain?

[Miss_Piggy]

I have a hard time believing and understanding how if we as taxpayers provide our monies to save a few but gigantic institutions (rich, greedy and probably criminal) will benefit and will suffer individually (in our own pockets) if we don’t.

Can anyone help me understand? I'd appreciate any details in simple language.

[FUTURESTRADER]

I have a hard time believing and understanding how if we as taxpayers provide our monies to save a few but gigantic institutions (rich, greedy and probably criminal) will benefit and will suffer individually (in our own pockets) if we don’t.

Can anyone help me understand? I'd appreciate any details in simple language.

I think its all about credit and loans. On the retail side. If you can't get credit for a car loan, you can't buy car, car manufacturers can't sell cars if no one can buy, then car companies go out of business and the people who worked for those companies - manufacturing as well as sales, lose their job. Same for all retail that a lot of people buy with credit - washing machines, electronics. May be impossible to get a loan for kids college. Ultimately, it could be good...everyone will have to live within their cash. Prices should on everything would have to drop considerably.

[Frixxxx]

Person:
wants house but money tight
buys house with A.R.M (even Sub Prime)
moves in
pays mortgage
2-5 years later A.R.M. gets crazy
Mortgage too high
Can’t pay mortgage
Foreclosure: Bank Owns

Bank:
Gives person A.R.M.
Bundles loans in M.B.S.
Sells MBS
MBS pays interests owner happy

MBS:
Gets created
Gets sold
Person defaults on loan
MBS bad, owner not happy

Bank:
Tries to sell new MBS
Insurer raises rates on MBS
No buyers
Can’t raise money
Can’t loan money
Holds on to assets and money

Businesses:
Can’t get loans from bank
Can’t run business
Shut down or consolidate and lay-off

Government:
Buys bad MBS from Banks
Banks raise money to lend
Bank lends money
Business stays open people have jobs
Government sells bad MBS later for profit

We have another name for this already
WELFARE except this time the government actually “OWNS” property
Bail out of corporation instead of people very hard to digest

If the government steps in, then the money comes from the treasury, and that will take a big IOU. That IOU is to be paid by the taxpayer or sale of the assets the government buys. To me, this is deterrent/prevention/stabilizing efforts. However, if the government doesn't step in, the banks consolidate, stop lending money for a while, businesses close because they can't get money. People can't work and go on unemployment. Taxpayer pays more taxes to support those who can't support themselves. Sooner or later we pay for those banking practices.

By the way, if you have watched the markets steadily decline since Nov '07, can you imagine the retirees scratching their head at lack of buying power they have now? Not to mention a limited number of IFTs to make the most of the situation.

[Show-me]

It is a gov. sponsored addiction called credit and is sold by proclaiming "why wait, buy it NOW".

[Silverbird]

I have a hard time understanding how this not a bailout whateveritis bill does anything to fix the credit crisis (except maybe push it back to next year)?

[Minnow]

I have a hard time understanding how this not a bailout whateveritis bill does anything to fix the credit crisis (except maybe push it back to next year)?

"I'll be long gone before some smart person ever figures out what happened inside this Oval Office." --George W. Bush, Washington, D.C., May 12, 2008

[Show-me]

It does not "fix" anything. The "hope" is that the lenders will loosen up and lend once they sell the bad paper to the tax payer, thus continuing the crime that got us here.

[Show-me]

Lending transfers wealth from the idiot people that can not afford the junk they buy throught the lender for a fee and to the retailers and producers. Thus, making the people that got us to this situation either more wealth or they have more junk to throw away at the city wide clean up.

[Silverbird]

So the House NOT passing this bill is irresponsible why?
I think we need a different bill?

[amoeba]

It does not "fix" anything. The "hope" is that the lenders will loosen up and lend once they sell the bad paper to the tax payer, thus continuing the crime that got us here.

Hope all you want, but the only sure thing is that if you spend $700B for bad paper, then you own the bad paper and the entity that you sold it to will have your $700B.

As far as the beneficial effect on short term credit shortage, there is no evidence from the rates, spreads, and/or futures, that this is necessarily going to happen at all - and certainly not instantaneously.

In other words, it is a complete waste of money. Don't do it. It won't work.

[Show-me]

So the House NOT passing this bill is irresponsible why?
I think we need a different bill?

Because, it is what the lobbiest want to save their butts and it will get worse before it gets better. It always does when you try to stop a addictive habit.

Hope all you want, but the only sure thing is that if you spend $700B for bad paper, then you own the bad paper and the entity that you sold it to will have your $700B.

As far as the beneficial effect on short term credit shortage, there is no evidence from the rates, spreads, and/or futures, that this is necessarily going to happen at all - and certainly not instantaneously.

In other words, it is a complete waste of money. Don't do it. It won't work.

I agree, just to be clear it is not me that is hopeful.

[Minnow]

[quote=Show-me;184107]Because, it is what the lobbiest want to save their butts and it will get worse before it gets better. It always does when you try to stop a addictive habit.

quote]

Nice post!!! They're like heroin addicts agreeing to go to the methadone clinic -- nice try ... try jail for some good 'ol economic d.t.'s and a cold turkey solution!!!

This may be a bit harsh but I agree with your addiction analogy.