How is this possible given the months long delay in passing the bailout so Congress could ensure tough safeguards — including jail time for violators — were in place? Of course you remember how Bush demanded the provision requiring the execs pay back exorbitant bonuses and give up golden parachutes. And how hard the Presidential candidates fought to make the bill tougher still. Or did I dream that…
Remember that $250 billion that the government is injecting into wobbly banks so they can start lending to American companies and consumers again? Yes? Well, of course the banks have no intention of lending out a dime of it.
Merrill’s John Thain admitted as much two days after the bailout. Then JP Morgan’s Jamie Dimon dropped hints to that effect by saying he “hoped” the bailout would work–implying that he didn’t think it would. And now another JP Morgan executive has been kind enough to tell Joe Nocera of the New York Times (via a recorded internal conference call) that JP Morgan has no intention of lending the $25 billion of taxpayer money the government just gave it to help restore the US economy:
[…]
To reiterate, what will banks do with the $250 billion we just gave them?* hoard it
* buy other banks with it.And, of course, the insurance companies and car companies that now want some of that money also aren’t going to lend it, either (or use it to write new policies or make cars). It’s just a sop to their shareholders and debtholders.
Of course, while this is going on the IMF is solely focused on fixing the world’s financial crisis which will come back to whack us while we try to recover.
Who’s enough of an idiot to think that throwing good money after bad would ever fix anything?
#1: You mean besides Congress (both parties), the President, the candidates…
#2 Uncle Dave said, “You mean besides Congress …”
Yes, I’m not talking about the morons from inside the beltway. I’m asking people on DU.
So Uncle Dave, did you support the “bailout”?
#5: I knew a big wad of it would go into someone’s pocket given the lack of controls. But beyond that, I really didn’t (and still don’t) know or understand econ enough to say if it would or could work, or what alternative is better or worse. Does anyone know what would work? Do you?
#5 You were correct. The money is going into the pockets of the crims who already stole.
You do know enough about econ, it has just been invalidated by criminals with bad theories. Go back to what you know money actually is. Also, the original concept of capitalism, not free market. The original definition of capitalism was the accumulation of money through the interest off of loans.
That is a parasitic activity. There is no production in it. The logical end result is the flow of most capital to those who don’t produce anything. It is a dead end activity.
There is a reason the new testament & the Koran forbid it. It has nothing to do with religion but everything to do with econ.
The question now isn’t how should things work, it’s how to fix the mess we’re in. That’s what I don’t know.
#7 The only way to FIX the problem is to change the system to what it should be. The 1st thing is to decouple the Fed from the private banking system. (see Constitution) We better stop insuring banks that have loan/asset ratios greater than 15:1 (currently 1000’s:1) Also, not pumping paper money (with nothing to back it) will start to cool inflation.
Getting rid of tax brackets (which encourage the gov to print $ thus pushing people into higher brackets and more total $ into the Treas) will help.
No one knows how the economy works. Even Big Ben Bernake mentioned that they underestimated the impact AIG had on commercial paper.
Finance has become extremely complicated and convoluted. With all the data available now with computing and distribution on the internet, it’s not possible to build a dashboard to identify red, yellow, green on how things are working.
Then you have the psychology factor. Wall Street is not about investing. It’s legalized gambling. Everyone runs to the latest rumor that makes a quick buck (and who wouldn’t). Then at times such as now with panic selling (and who wouldn’t want to stop their loss). No one looks at the long term.
Did the economy really drop a third of it’s value with the drop of the Dow? Was it oversold that much and need this correction? Or did the economy get whupped beyond the tru reality because of the falling Dow a self fulfilling prophecy as it were?
As for fixing it, the governments of the world can only stimulate – they cannot fix. It will take restoration of faith in the system. And yes it will take some greed by the big players at the point they realize there are some opportunities in places to make some money again rather than hoarding. It will take innovation, leadership and entrepreneurial determination.
I predict a bit of a bounce in the markets after Obama is elected. No sarcasm. I don’t like either candidate but I do think how people look at Obama will play well into the psychology of the markets. But it won’t last and we will have to look beyond hope. What can government do to stimulate things without avoid big government further intruding into our lives on top of post-9/11 power grabs and without imploding the deficit? There obviously isn’t much “trickle down” happening from the current bailout.
Ha! Thanks for the sample wrongcards.com! I went over there looking at their goods. Brilliant, and mean. Kind of like those funny demotivator posters at Despair.com.
#9 “As for fixing it, the governments of the world can only stimulate – they cannot fix.”
Right. The only way to stimulate without pumping worthless paper money into the system is to take much less from the consumer in the form of taxes so people can spend on goods that will stimulate the economy.
Of course the governments will do the opposite as tax revenues drop because of the slowing economy, thus slowing it more. (see the insanity of the CA legislature)
#3 Pedro
It would depend on both what actions the Russians would take in response and also on the severity of the situation.
Worst-case scenario:
If this leaves them scrambling for so much cash to prop up their financial system that they are forced to dump most of the dollar bonds they hold to get the money it could wipe out the weak value of the dollar and possibly trigger global sell-off of said currency as creditor nations (China, gulf states) decide to cash in before it falls any further, paradoxically triggering the mess they were hoping to avoid.
On the other hand the if the financial crisis is severe enough it will almost certainly limit Russia’s geopolitical ambitions and economic influence worldwide.
Just a lot of ifs, no hard answers at the moment.
I agree economics once you get past an island with 3 people, 12 coconuts, and 6 canoes is complicated—-but—-its madness to complicity to “allow” lenders to issue zero downpayment loans for houses on the theory that houses will always increase in value. Thats not really “stupid”==its criminal.
And even THAT is ok as long as the criminality is not insured by the taxpayer.
And even THAT is ok as long as the criminality and stupidity is not insured AFTER THE FACT by more ciminality and stupidity.
When something is WRONG on its face, there has to be overwhelming evidence/proof that it is in fact the best course of action. Here, we are bailing out failed institutions. I see no strong evidence its the right thing to do===so, most likely it is NOT the right thing to do. Some other response yes, but not the no strings bailout.
If credit is the issue, why not have the Gov provide NEW guarantees under prudent rules? Still lots of hurt but the harm would primarily fall on those who deserve it.
Reading this does not make me a happy camper. I don’t know how to say it any milder.
So this is how the Bush Treasury Department is handling our money. And McCain will be more of the same.
What’s really moronic is to think that our politicians and institutions didn’t know what was happening or what would happen with the bailout. This has all been orchestrated to manipulate the sheeple. Why the hell do you think there was such a hurry to get the bailout approved. Any serious study would have easily predicted the reaction of the recipients of the bailout. What we really need is a serious investigation. Unfortunately this would expose the ultra powerful groups behind all this – so it’s not gonna happen. Timmons (Washington lobbyist for Fannies Mae and Mac, and many other equally despicable institutions) is going to be on McCains transition team, Obama took campaign contributions through him too, this is the guy that’s got direct contact with those behind this crisis and guess what? He’s there to make sure your politicians don’t make any decisions that could harm their interests and if necessary convince them that it’s in everyone’s interest to use public money to cover their losses. The US is screwed because their ‘democracy’ is a sham to cover for these greedy pigs. Our forefathers fought for the seperation of church and state, it’ll be up to us to fight for the seperation of private interests from public ones. Mission Impossible? perhaps, but the alternatives are grim indeed.
Even when I was studying econ I could never understand it (although somehow I faked my way through).
It’s amazing that many, supposedly well educated people in leadership positions said that they couldn’t see this coming. Greed run wild. Not necessarily the lack of regulation. Just greed and stupidity.
How many dollars have been created in the past couple of months? How many more will be?
The government (collectively) believes enough money will solve any problem. I’m voting for my incumbent Senator only because he voted against the bailout. I’m voting against my representative because she voted for it.
#16 – you aren’t the only who faked it… Wall Street and the Fed have been faking too.
#14 – Stop drinking the Democratic Kool Aid. I didn’t see any of the Dems including Obama pounding their fists prior to the crisis sounding the alarm. No, they were on the payroll of the lobbyists just as much as the Republicans.
Like all politicians, they avoid making the tough decisions on the economy, regulations, the budget deficits or Social Security.
How many of them are being vocal about that neither McCain’s or Obama’s tax cuts may never see the light of day? They know we can’t afford it and there has been some discussion on the topic. But that won’t get your guy elected. Better to keep quiet and wait.
Insanity and incompetence.
This is the problem with isolating reward from risk. We need to do some serious UNINSURING of the financial system to clear out the morons who are currently running things by letting them crash and burn (and then removed), not get rescued and bonused for doing the wrong things.
De-evolution, it works. Look at Wall Steet.
We need to put Darwin back in charge, not bring in Karl Marx as an insurance agent.
Can I ask..
How many of you feel this is a game of WHACK-A-MOLE..
And we are the MOLE..
#20 ECA said, “How many of you feel this is a game of WHACK-A-MOLE..
And we are the MOLE..”
Now that you mention it, I have a headache…
#20, That is the phrase I’ve been hunting for!
Thanks, ECA.
#14, I’m not trying to start another Dem/Rep argument, but it’s not just the current administration. The Dems are just as complicit in this fiasco as the Reps. EvilPoliticians is correct. Knowing the bailout didn’t fix things, you aren’t going to to hear a single word out of either of them until after the election.
AFA the article: If there is money to be handed out by the government, it is in everyone’s best interest to spend as much as you can get back trying to get it. Anything you get above what you spent is profit. The lobbyists are seeing dollar signs in their eyes right now. This is what happens when the gov gives out money — anybody with a lobbyist puts him on a plane to DC.
I was reading a artical in the WSJ last week and it hit me. I had been wondering how they would use the 700 Billion. It came to me they will will be covered in there losses on homes. They will own the homes. witch they can then sell or hold. either way they win. We the tax payers.just bought a bunch of banks homes. Homes they can not lose on. How this helps the other homeowners and the taxpayer i am not so sure about.
23, you got it…
tHOSE FOLKS THAT HAVE BEEN paying FOR 10-20 YEARS…PAID for nothing except RENT..
Even if the house has lost value, THAT RENT paid it. They will STILL sell that $150-200 thousand dollar home, for $100-125 thousand EASY..
If the RICH aint spending it…I dont have to.
Only problem, is I need to pay BILLS, and BUY FOOD.
i still say…JUMP out of the stock exchange..WATCH IT DUMP OUT..
THEn re-invest.
REPUKES CONTINUING TO ***LOOT IN ALL DIRECTIONS*** !!!
Come Election Day, NEVER VOTE FOR A REPUBLICAN FOR ***ANY OFFICE*** FROM COAST TO COAST, FROM MAINE TO CALIFORNIA, FROM FLORIDA TO YES, ALASKA !!!
PATIROTIC AMERICANS NEED TO ***DRIVE THE TREASONOUS REPUKES FROM EVERY PUBLIC OFFICE IN AMERICA*** !!!