Housing Rescue Bill - Your thoughts

[Mooseman]

Actually, I believe that its a blank check to the Fed that they are asking for. But, now Congress wants to have some oversite of how it's going to be handled.

I satill think they have to let values find a balance due to mostly market forces and not to prop them up through Gov money.
I'm sorry, but I believe that prices, mostly housing, were inflated and not reflecting their true value.

 

[Mooseman]

Why does this sound like a better idea then the shrubs plan?

What House Republicans want:

They issued a statement of economic rescue principles that calls for Wall Street to fund the recovery by injecting private capital - not taxpayer dollars - into the financial markets. Easing tax laws would prompt investors to put in their own dollars, they said.

The plan also calls for: participating firms to disclose the value of the mortgage assets on their books, ending Fannie Mae and Freddie Mac's securitization of "unsound mortgages," reviewing the performance of the credit rating agencies and having the Securities and Exchange Commission audit failed companies to ensure their financial standing was accurately portrayed.

House Republicans also want to create a panel to make recommendations for reforming the financial industry by year's end.

Meanwhile, the ranking Republican on the Senate Banking Committee has another idea. Sen. Richard Shelby, R-Ala., said he doesn't support the Treasury plan until there is serious consideration of alternatives. He proposed Thursday adding funds to the Federal Reserve and Treasury to allow them to lend more to financial institutions.

 

[Mooseman]

What is wrong with this story????? $700 billion bail out? For who? Or is that whom?



Nice work — if you can get fired from it.

That's just what one Alan H. Fishman might have thought when he woke up Friday morning.

Fishman was the new chief executive officer for Washingon Mutual — WaMu — the nation's largest savings and loan, which was taken over Thursday night by federal bank regulators and quickly dumped in a fire sale to JPMorgan Chase for the Wal-Mart-like price of $1.9 billion.

But don't cry for Fishman, who reportedly was sky-high — literally — last night, on a flight from New York to Seattle, when WaMu collapsed. Even though he's only been on the job for less than three weeks, he's bailing out with parachute worth close to $20 million, according to an executive compensation analysis conducted for the New York Times by James F. Reda Associates.

That's right, $20 million for 17 days on the job ... and his company failed.

Fishman, who formerly was chairman of Meridian Capital Group, apparently was much coveted by WaMu, which was counting on him to lead the failing thrift out of mortgage troubles that pushed the bank to a $3.3 billion second-quarter loss.

According to filings with the Securities and Exchange Commission, WaMu threw a $7.5 million bonus at Fishman when it hired him on Sept. 8, and guaranteed him an immediate cash severence of $11.6 million — both of which he gets to keep.

He also was eligible for annual bonuses of up to 365 percent of his annual base pay — set at $1 million — to go with millions of shares of company stock.

Fishman does lose out on a big bonus that would have kicked in had he remained on the job through 2009.

Documents show WaMu was going to pay their new boss $8 million to simply not screw up and get fired — all negotiated as the Seattle-based banking giant's loses climbed to an estimated $20 billion.

 

[Spiderman]

Just incredible...

 

[mythosx]

You know what? Back in the day people like this would be lynched. More execs should be jumping out of windows. Stupid golden parachutes and poison pill contracts. Those should be illegal.

 

[EricBess]

http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?eref=rss_topstories
Okay, I need to see if I understand what is going on here.

The economy is tanking because there are far too many people who cannot live up to the terms of their morgages and the banks are unable to stay solvent because of this.

Congress wants to create a bail out plan that will cost taxpayers $700 billion dollars (estimated $6,000 per household without considering interest) if the housing bill passes.

If the housing bill doesn't pass, the concern is what? If I understand correctly, the concern is that our current understanding of the economy with crumble. That credit will (for a while) be all but impossible to obtain. Cars will only be afordable by people who can pay cash (which will lead to economic disaster for the US auto industry, no doubt). Purchasing a house will be very difficult because banks will not be able to afford to loan money.

But to some degree, this seems rediculous to me because there is currently a huge surplus of homes available and not all banks are going under.

I believe it will become much more difficult to get credit. People will be forced to live on a budget dictated by what they make and not by how much credit they can get.

Certainly, this will be devistating in the short term as things straighten themselves out and a lot of huge hits, but some of these failing banks are already being purchased by other banks, so there must be some redeeming factors there.

Democrats want to incorporate more help for people threatened with foreclosure. Republicans want to establish "guarentees" to encourage outside investors to take up the bulk, leaving taxpayers currently exposed for only those companies that are unappealing to investors.

But I still don't see what is so bad about just letting the banks fail. Aren't we sending a message that you can make foolish choices and live beyond your means and if you are big enough, we'll just make taxpayers bail you out? Long term, aren't we better off finding another solution or letting things ride out a bit?

Does anyone understand this better and can explain it to me?

 

[DarthFerret]

I am pretty dumb-stupid when it comes to trying to understand financials (I can do my personal budget, but that is about as far as I care to go). I do find it kinda funny that it was speculated that it was voted down because of Pelosi's partisan speech.

#1. If that is the case, we have some pretty petty Republicans in the House. I do not know if it is really why it did not pass though.

#2. It is pretty poor taste for Pelosi to expect a bi-partisan effort, and then slam Republicans and the nations president for something that was not directly in his control in the first place. No matter what her (or her parties) opinion is, she shoulda kept her mouth shut until after a vote. Even afterward, it would not be polite, but then who said congress had to be polite.

As for what happens if some banks go bankrupt? I have no idea. I know that if all banks go bankrupt, our economy would come to a screeching halt. That is because not just people, but many businesses rely on credit. A prime example (and something that hit pretty close to home a few weeks ago) is our electricity suppliers. They take out loans to do major repairs (such as from hurricane Ike). If they cannot get a loan, then they cannot pay for thier equipment, labor, and fuel to get electricity lines back up. They do have some reserve cash for *Storm Emergencies* but they are limited (by some kind of regulation, not sure whose) to how much cash they can have on hand. It might be to prevent price gouging by a monopoly, but again, I cannot be sure on that either. I just know that without loan money availible, they would not have gotten my power restored (it scared me to think how close we almost came to that).

I know, prolly not much help here, but something needs to be done, and congress is not gettin it done. Does anyone know the people on the Committee for Energy or whatever it is called?

 

[mythosx]

It was not a case of partisan politics that it was voted down. Republicans are strict anti-goverment regulation. They truly believe that the government should not step in to help it. They believe in the free market. Secondly, most congressmen received and overwhelming (15 to 1) from their constituients against the bill.

 

[Mooseman]

As for what happens if some banks go bankrupt? I have no idea. I know that if all banks go bankrupt, our economy would come to a screeching halt.

Then they are bought up by those companies that weren't stupid....
Bank of America, Citigroup, Warren Buffet have all grabbed up failing companies. The credit will tighten, but then it should to some extent.
There is a lot of illusionary wealth out there that needs to be realistically valued.
A lot of those homes on the market will have to be sold for pennies on the dollar just to get them off of companies debit sheets.

I hear a lot of talk about bail outs and resues for companies and homeowners at risk from loans they can't afford.......
Well what about those of us who don't get in over our heads and live within our means? what do we get? I think it's the short end of the stick.....

 

[Mooseman]

I'm surprised that I agree with Ron Paul on anything, but this makes sense:

If there are too many houses and the prices are too high, the sooner we get the prices down to the market level, as soon as we quit trying to encourage more housing -- this is what we're doing. They're trying to stimulate houses and keep prices high. It's exactly opposite of what we should do.

So, we should get out of the way and not buy up bad debt. There's illiquid assets, but most of those are probably worthless. They're mostly derivatives. And we're sticking those with the taxpayer. So we have to recognize that the liquidation of debt is crucial. And if we did that, we would have tough times, there's no doubt about it, for a year. But if we keep propping a system up that's not viable, we're going to have a problem for decades, just like we did in the Depression. That's what we're on the verge of doing.

 

[Oversoul]

Does anyone understand this better and can explain it to me?

Not I. Economics is a bit of a weak spot for me. But I will say that your conclusions are basically the same ones I came to.

 

[mythosx]

Mooseman makes an extremely valid point. The only problem is that there are a few big financial institutions left that are still solvent. If everything collapses too fast like Ron Paul would have it then the very few left will swoop in and buy up everything and create a whole new problem. We need to deflate housing prices, but we have to do it prudently.

 

[DarthFerret]

I created this today at work...It is primarily a cut and paste job from a section of the bill that the senate passed yesterday and is under House review currently.....

Your Elected Officials At Work For You!
(This is inserted into the Housing Rescue Bill passed by our Senate on 10-1-08)

20 SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN
21 WOODEN ARROWS DESIGNED FOR USE BY
22 CHILDREN.
23 (a) IN GENERAL.—Paragraph (2) of section 4161(b)
24 is amended by redesignating subparagraph (B) as sub301
O:\AYO\AYO08C32.xml S.L.C.
1 paragraph (C) and by inserting after subparagraph (A)
2 the following new subparagraph:
3 ‘‘(B) EXEMPTION FOR CERTAIN WOODEN
4 ARROW SHAFTS.—Subparagraph (A) shall not
5 apply to any shaft consisting of all natural
6 wood with no laminations or artificial means of
7 enhancing the spine of such shaft (whether sold
8 separately or incorporated as part of a finished
9 or unfinished product) of a type used in the
10 manufacture of any arrow which after its as11
sembly—
12 ‘‘(i) measures 5⁄16 of an inch or less in
13 diameter, and
14 ‘‘(ii) is not suitable for use with a bow
15 described in paragraph (1)(A).’’.
16 (b) EFFECTIVE DATE.—The amendments made by
17 this section shall apply to shafts first sold after the date
18 of enactment of this Act.

Is this really what our elected officials do all day? Ponder the excise taxes on childrens toys? Come on..this is blatently stupid!

 

[Mooseman]

If everything collapses too fast like Ron Paul would have it then the very few left will swoop in and buy up everything and create a whole new problem. We need to deflate housing prices, but we have to do it prudently.

1) What whole new problem would that be?
2) How do you deflate housing prices prudently?

 

[Killer Joe]

Stocks down today by a freakin' LOT!

 

[Spiderman]

Went back up by the close of session but that was a wild ride

 

[Killer Joe]

If I had even a $1,000 that I didn't need right away I'd start buying stocks in all sorts of places. This looks like a buyers market right now.

but, alas, I don't have any extra ca$h.

 

[Mooseman]

I don't think we've seen the end of the ride. With the election coming and the Fed printing money it's gonna get real wierd for the remainder of the year. Watch for retail sales to be down for the x-mas season.

 

[DarthFerret]

Actually, what I will be looking for is some really good retail deals to be had as they try to keep that from happening. The blitz (day after Turkey day) may actually be worth looking into this year (Notice I said may be.....all those crazy people still might outweigh the benefits).

 

[rokapoke]

Two years ago I went "Black Friday" shopping for a digital camera. My wife and I pulled into the Target parking lot at 4pm, parked far away (just in the first open spot we saw), walked in to the electronics section, found the camera we wanted, and bought it right there.

In and out in less than 5 minutes.

It's all about timing on Black Friday.