Bailout Alternatives and Critiques

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If you look at those who voted yes where the Representatives (Both the GOP and the Dem's) who had little to no chance of loosing their seats in the House in this coming election. My Rep Gary Miller(R) has never had a threating Democratic challenger in the last couple of elections and he voted yes for this bailout. So, Miller will never see a vote from me ever.
 
[quote author="awgee" date=1222832494]One of the big lies I am hearing repeated over and over: "We do not need to figure out who or what is to blame. We need to fix the problem first and we can blame later."



How in the world do you know what to fix or how to fix a problem if you have not taken the time to figure out what the problem is? If you do not know what the problem is or what caused it, how do you know your solution is not more of the same that caused the problem initially? Little poll here. How many of you believe Paulson when he says his priority is Main Street? Do you realize he is batting zero out of four for solutions to this problem? And now, he has the correct solution?



Just as you can not solve a heroin addiction with more heroin, you can not solve a credit crisis with more credit. You can relieve the symptoms for awhile, but you just postpone the inevitable and make the problem worse. My guess is that this bill will have absolutely no effect on the credit crisis. It will only, and I mean <strong>ONLY</strong> transfer the debts of wealthy banks onto your children. The addict will never be satisfied and lives only for him/herself.



The Fed injected $650 billion into the markets yesterday and it had no effect on unfreezeing the credit markets. Last week, the Fed injected over $1 trillion, with no effect. And somehow, making your children responsible for $700 billion of the wealthy bank's bad debt is going to make a difference?



Yeah, I know, but you say, "We gotta do something."

Doing something is what got us into this mess.</blockquote>


There was one provision of the bill the Republicans were pushing that would help things: implement mark-to-market accounting immediately. If the banks were to reveal just what crap they own and value it accordingly, we would immediately know who was doomed and who was healthy. The market would quickly push the insolvent institutions into bankruptcy, and the "crisis of confidence" would be over. The problem with the credit markets seems to be that nobody knows who is solvent and who is not. Fix that problem, and the credit markets would likely calm down.
 
[quote author="IrvineRenter" date=1222835912]

There was one provision of the bill the Republicans were pushing that would help things: implement mark-to-market accounting immediately. If the banks were to reveal just what crap they own and value it accordingly, we would immediately know who was doomed and who was healthy. The market would quickly push the insolvent institutions into bankruptcy, and the "crisis of confidence" would be over. The problem with the credit markets seems to be that nobody knows who is solvent and who is not. Fix that problem, and the credit markets would likely calm down.</blockquote>


Mark to Market and $700B for Paulson with oversight to get Buffett style deals.



No taking bad assets, just a big investor checkbook for anybody needing it to get capitalized.



No BS foreclosure provisions.

No BS CEO penalty packs

No BS profit earmarks for pet projects



Keep it simple. If Buffett won't give you the money and Soros won't give you the money, guess what, I will demand a better deal and the American tax payer should too.



I know, ugly ugly, basically a nationalization of the banking industry.
 
[quote author="IrvineRenter" date=1222835912][quote author="awgee" date=1222832494]One of the big lies I am hearing repeated over and over: "We do not need to figure out who or what is to blame. We need to fix the problem first and we can blame later."



How in the world do you know what to fix or how to fix a problem if you have not taken the time to figure out what the problem is? If you do not know what the problem is or what caused it, how do you know your solution is not more of the same that caused the problem initially? Little poll here. How many of you believe Paulson when he says his priority is Main Street? Do you realize he is batting zero out of four for solutions to this problem? And now, he has the correct solution?



Just as you can not solve a heroin addiction with more heroin, you can not solve a credit crisis with more credit. You can relieve the symptoms for awhile, but you just postpone the inevitable and make the problem worse. My guess is that this bill will have absolutely no effect on the credit crisis. It will only, and I mean <strong>ONLY</strong> transfer the debts of wealthy banks onto your children. The addict will never be satisfied and lives only for him/herself.



The Fed injected $650 billion into the markets yesterday and it had no effect on unfreezeing the credit markets. Last week, the Fed injected over $1 trillion, with no effect. And somehow, making your children responsible for $700 billion of the wealthy bank's bad debt is going to make a difference?



Yeah, I know, but you say, "We gotta do something."

Doing something is what got us into this mess.</blockquote>


There was one provision of the bill the Republicans were pushing that would help things: implement mark-to-market accounting immediately. If the banks were to reveal just what crap they own and value it accordingly, we would immediately know who was doomed and who was healthy. The market would quickly push the insolvent institutions into bankruptcy, and the "crisis of confidence" would be over. The problem with the credit markets seems to be that nobody knows who is solvent and who is not. Fix that problem, and the credit markets would likely calm down.</blockquote>


I read that one of the provisions to be incorporated in the new bill is the elimination of mark to market accounting with the banks being able to set the values for their "assets". And I think the reason no one knows who is solvent and who is not, (I am guessing they are all insolvent), is because they are deigning them level 3 assets and they are being hidden off balance sheet. This is why I rarely to never short the large financial institutions. Their balance sheets are black holes and I have yet to find a method to value them.
 
[quote author="awgee" date=1222844218][quote author="IrvineRenter" date=1222835912][quote author="awgee" date=1222832494]One of the big lies I am hearing repeated over and over: "We do not need to figure out who or what is to blame. We need to fix the problem first and we can blame later."



How in the world do you know what to fix or how to fix a problem if you have not taken the time to figure out what the problem is? If you do not know what the problem is or what caused it, how do you know your solution is not more of the same that caused the problem initially? Little poll here. How many of you believe Paulson when he says his priority is Main Street? Do you realize he is batting zero out of four for solutions to this problem? And now, he has the correct solution?



Just as you can not solve a heroin addiction with more heroin, you can not solve a credit crisis with more credit. You can relieve the symptoms for awhile, but you just postpone the inevitable and make the problem worse. My guess is that this bill will have absolutely no effect on the credit crisis. It will only, and I mean <strong>ONLY</strong> transfer the debts of wealthy banks onto your children. The addict will never be satisfied and lives only for him/herself.



The Fed injected $650 billion into the markets yesterday and it had no effect on unfreezeing the credit markets. Last week, the Fed injected over $1 trillion, with no effect. And somehow, making your children responsible for $700 billion of the wealthy bank's bad debt is going to make a difference?



Yeah, I know, but you say, "We gotta do something."

Doing something is what got us into this mess.</blockquote>


There was one provision of the bill the Republicans were pushing that would help things: implement mark-to-market accounting immediately. If the banks were to reveal just what crap they own and value it accordingly, we would immediately know who was doomed and who was healthy. The market would quickly push the insolvent institutions into bankruptcy, and the "crisis of confidence" would be over. The problem with the credit markets seems to be that nobody knows who is solvent and who is not. Fix that problem, and the credit markets would likely calm down.</blockquote>


I read that one of the provisions to be incorporated in the new bill is the elimination of mark to market accounting with the banks being able to set the values for their "assets". And I think the reason no one knows who is solvent and who is not, (I am guessing they are all insolvent), is because they are deigning them level 3 assets and they are being hidden off balance sheet. This is why I rarely to never short the large financial institutions. Their balance sheets are black holes and I have yet to find a method to value them.</blockquote>


If they continue to hide this stuff, the credit markets will not be calmed, and the whole bailout would go for nothing.
 
[quote author="IrvineRenter" date=1222850929][quote author="awgee" date=1222844218][quote author="IrvineRenter" date=1222835912][quote author="awgee" date=1222832494]One of the big lies I am hearing repeated over and over: "We do not need to figure out who or what is to blame. We need to fix the problem first and we can blame later."



How in the world do you know what to fix or how to fix a problem if you have not taken the time to figure out what the problem is? If you do not know what the problem is or what caused it, how do you know your solution is not more of the same that caused the problem initially? Little poll here. How many of you believe Paulson when he says his priority is Main Street? Do you realize he is batting zero out of four for solutions to this problem? And now, he has the correct solution?



Just as you can not solve a heroin addiction with more heroin, you can not solve a credit crisis with more credit. You can relieve the symptoms for awhile, but you just postpone the inevitable and make the problem worse. My guess is that this bill will have absolutely no effect on the credit crisis. It will only, and I mean <strong>ONLY</strong> transfer the debts of wealthy banks onto your children. The addict will never be satisfied and lives only for him/herself.



The Fed injected $650 billion into the markets yesterday and it had no effect on unfreezeing the credit markets. Last week, the Fed injected over $1 trillion, with no effect. And somehow, making your children responsible for $700 billion of the wealthy bank's bad debt is going to make a difference?



Yeah, I know, but you say, "We gotta do something."

Doing something is what got us into this mess.</blockquote>


There was one provision of the bill the Republicans were pushing that would help things: implement mark-to-market accounting immediately. If the banks were to reveal just what crap they own and value it accordingly, we would immediately know who was doomed and who was healthy. The market would quickly push the insolvent institutions into bankruptcy, and the "crisis of confidence" would be over. The problem with the credit markets seems to be that nobody knows who is solvent and who is not. Fix that problem, and the credit markets would likely calm down.</blockquote>


I read that one of the provisions to be incorporated in the new bill is the elimination of mark to market accounting with the banks being able to set the values for their "assets". And I think the reason no one knows who is solvent and who is not, (I am guessing they are all insolvent), is because they are deigning them level 3 assets and they are being hidden off balance sheet. This is why I rarely to never short the large financial institutions. Their balance sheets are black holes and I have yet to find a method to value them.</blockquote>


If they continue to hide this stuff, the credit markets will not be calmed, and the whole bailout would go for nothing.</blockquote>


Reports are the Fed injected $650 billion into the credit markets on Monday and it did diddly squat to unfreeze the credit markets. I am guessing that another $250 billion or $700 billion is not going to make any difference.
 
I can't recall where I read it, but the story was that the liquidity isn't helping because rather than lending the money, the banks are holding it. {sigh}
 
[quote author="IrvineRenter" date=1222850929]If they continue to hide this stuff, the credit markets will not be calmed, and the whole bailout would go for nothing.</blockquote>
IR, seriously. If the financial firms had intended to do the right thing, they would have written these assets down to market value and gotten it over with already. The firms holding this crap are refusing to take their lumps, and hoarding cash is the only defense they have against bankruptcy. The only way out of this is to force these things to be marked to open market value, because they clearly aren't going to do it themselves. Right now, their best play (from a purely selfish perspective) is to hold the credit markets hostage until the Congress passes a bill that allows them to unload their toxic paper on the taxpayer so they can get back to business as usual. This whole "crisis" is based on financial firms trying to avoid accepting their own loss and being forced into bankruptcy and they don't care how many smaller firms have to die in order to get what they want. In the interim, they are arguing for relief from FAS rules so they can assign a random value to the toxic paper while they squeeze the Fed and Treasury for every last drop of money they can get.



I've seen gambling addicts with a stronger grip on reality.
 
[quote author="blackacre-seeker" date=1222869081]Does anybody know how our congressman Campbell voted? I didn't see his name in the vote breakdown list. Thanks!</blockquote>
[quote author="skek" date=1222742619]John Campbell voted "aye." Sorry, John, I understand why you did it but I think that was the wrong vote.</blockquote>
 
I was wondering, why the Department hasn't considered the possibility of doing some sort of bond-swap for the the distressed assets. Could the Treasury Dept. issue zero coupon treasuries with staggered maturities, say 1,2,3,4,5 years, in exchange for the MBS instruments?







My thinking is that since zero coupons are sold at a deep discount, it would allow the Treasury to swap "dollar-for-dollar" in value with these distressed assets, ensuring that we don't overpay for them. This could perhaps be done with traditional treasuries as well, or some combination of the two. I personally like the idea of a zero coupon because of its cash flow implications for the US.







The financial company's balance sheet would then be vastly strengthened since they are holding AAA US debt. The Gov't would then be the owner of the distressed bonds and will have the ability to perhaps modify them to enhance cash flow and the probability of future sale for profit.







Unless I am missing something (which that is quite likely!) the US Government would eliminate the cash flow nightmare of an immediate $700 billion dollar dump. We'd also be able to postpone the debt payments over the next few years. To me, this is a way to restore faith in the banks balance sheets while leaving their future success, and cash flows, up to them.







What are your thoughts?
 
[quote author="lendingmaestro" date=1222904011]I was wondering, why the Department hasn't considered the possibility of doing some sort of bond-swap for the the distressed assets. Could the Treasury Dept. issue zero coupon treasuries with staggered maturities, say 1,2,3,4,5 years, in exchange for the MBS instruments?







My thinking is that since zero coupons are sold at a deep discount, it would allow the Treasury to swap "dollar-for-dollar" in value with these distressed assets, ensuring that we don't overpay for them. This could perhaps be done with traditional treasuries as well, or some combination of the two. I personally like the idea of a zero coupon because of its cash flow implications for the US.







The financial company's balance sheet would then be vastly strengthened since they are holding AAA US debt. The Gov't would then be the owner of the distressed bonds and will have the ability to perhaps modify them to enhance cash flow and the probability of future sale for profit.







Unless I am missing something (which that is quite likely!) the US Government would eliminate the cash flow nightmare of an immediate $700 billion dollar dump. We'd also be able to postpone the debt payments over the next few years. To me, this is a way to restore faith in the banks balance sheets while leaving their future success, and cash flows, up to them.







What are your thoughts?</blockquote>


That makes a lot of sense. Thus, it'll never happen. [/scarcasm]



I heard Steve Leisman talking about this on CNBC this morning. It was my understanding that they haven't quite hammered out how they are going set up the mechanism, and they were floating around a couple of ideas. Is this accurate or did I misunderstand?
 
I heard that both Pres candidates agree with the addition to the bailout of raising the FDIC limit to $250k. What am I missing? Why is raising the limit a good idea? Isn't the FDIC already going to be broke?
 
T!m, you might check out this <a href="http://www.irvinehousingblog.com/forums/viewthread/3254">thread</a>
 
So, I'm working through an idea to share with my Congressman and I can't think of a better group of people to vet it than this crowd. The idea is still gestating but I want to get the idea out lest I go completely down the wrong track before I invest too much time in it. I'll paste it below and I'd like to invite everyone here to rip the living crap out of it where it doesn't make sense. If part(s) do make sense, I'd like to hear about that as well.



Now, before I get to the text, I'd like to state clearly that I'd prefer that we do NOTHING to bail the economy out. What I am offering is that if Congress is hell bent on doing SOMETHING that 'something' should be focused on generating demand for housing rather than bailing out Wall St. So here goes, tear into it:



Dear Rep. Rohrbacher,



As one of your constituents, I would like to thank you for your opposition to the ridiculous and costly bail out of Wall Street. As I tax-paying American and a fiscal conservative, I am furious that some in Congress are seeking to bail out special interests on the taxpayers' dime.



Rather than bailing out the special interests, if we Americans want to shore up the housing sector and by extension the financial sector, what we need to do is spur demand for housing. If demand for housing picks up, prices will rise faster than otherwise and:



? More homeowners will be able to refinance their homes, keeping more Americans and OC residents in their homes.

? Owners seeing the value of their homes rise will be less likely to walk away leaving the banks holding the keys and the associated non-performing loans.

? Lenders will be able to sell their portfolios of properties at higher prices, improving their balance sheets and potentially even earning a profit on some properties.

? With new down-payments being paid to banks, there would be a significant injection of liquidity from the private sector into the financial system.



If more Americans and OC-resident buy homes homeowners, lenders and the financial system all benefit. Why rely on tax-payers to cure our economic ills when American families can do the job? Isn?t this what capitalism is all about?



Rep. Pelosi sponsored a very unfortunate bill that allowed some to receive a first-time buyer?s credit of $7,500 with income-level phase-outs that essentially excluded all of your constituents here in OC; it did nothing to spur demand here in HB or anywhere else in your district. Useless.



What I?d propose is that the Federal Government makes very low interest loans to some Americans wishing to buy a home. To avoid a number of complications, there would be rules and conditions to the loans:



1. Buyers would only be able to purchase a primary residence. ?Flipping?of homes by investors helped create the bubble that we?re facing today; we need no more of this.

2. Buyers would be required to put 10% down. Zero-down loans don?t force buyers to ?put any skin in the game?; it makes them reckless with their buying habits and all-to-willing to walk away if prices move against them.

3. Buyers would need to document income. ?Liar loans? caused a big part of the mess we?re in today.

4. Buyers would need to have ?good? credit. I?m no expert here, but I would say a FICO score north of 680 is a good start.

5. Loans would be for a maximum of three to five years: long enough to increase confidence in the housing markets today, but short enough to bar the perception of permanence.

6. There would be no income phase-out for qualification of any kind. We need legislation to enable those with the income necessary to buy home to qualify. Why exclude those with the money and incomes to buoy the ailing housing and financial markets?



The benefits to the American public I mention above would make this plan popular with American voters and the loan conditions I would make the plan safe, but the thing I like best about this plan is that it also can be done at little to no cost to the American taxpayer.



Yields on federal treasury notes are at their lowest levels in memory; the current yield on three-year treasuries is 2.12% whereas the five year note yields a meager 2.87%. If we were to tack on a 2% premium, a three year loan could be had for roughly 4% and a five year loan for 5%.This difference between the yield on the bond and the yield on the loan is called the ?spread.?



This spread affords the United State of America the ability to actually make a profit?something that I think American tax payers would find both unusual and very welcome with deficits as high as they are. This spread also hedges against risk, which I believe we both agree is an important factor at this point in time and economic history.



As I am in favor of small government, I would naturally favor that the private sector administers these loans; this would have the added benefit of increased cash flows and liquidity to the private sector.





Best regards,



<HB Bear>



Like I said, the more critical (let's try and keep it constructive) people are the better off I'll be if I can actually ever get a meeting with the guy.



Thanks!
 
I give you props for being creative, but they aren't looking for alternatives. I really think the point of all this bailout talk is to negotiate the breadth and depth of a collapse, not prevent it. There are too many actors making changes for it not to be a co-ordinated effort, and the bailout is only one part of the puzzle.
 
[quote author="Nude" date=1222940213]I give you props for being creative, but they aren't looking for alternatives. I really think the point of all this bailout talk is to negotiate the breadth and depth of a collapse, not prevent it. There are too many actors making changes for it not to be a co-ordinated effort, and the bailout is only one part of the puzzle.</blockquote>


I think they are purposefully negotiating a more complete and devastating collapse with the intention of getting rid of alot of competition and buying distressed assets at bargain prices. And getting the taxpayers to pay for their costs of engineering a collapse. I think the problem y'all are having is you think like the good people that you are with the best intentions. If you want to understand what is happening, think like a thief.
 
[quote author="skek" date=1223079794]Just passed. 226 Aye votes and counting...</blockquote>


Guess I can reduce my Fed tax withholdings for the rest of the year now that AMT has been patched again. Where's that darn W-4?...
 
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