[Vision2020] Why are we bailing out all these large corporations?

Mon Sep 22 09:34:24 PDT 2008

Donovan --

Three paragraphs worth of platitudes is difficult to argue with. I
take it that your position is that failing to deal with this financial
calamity will actually be *worse* for America, but that we should do
it anyway to build ourselves into a race of moral supermen?

-- ACS

On Mon, Sep 22, 2008 at 12:15 AM, Donovan Arnold
<donovanjarnold2005 at yahoo.com> wrote:
> Andreas,
>
> What you are talking about doing is socialism. A State run economy. We know
> this doesn't work. Printing up an addition $700 billion is only going hurt
> those that rely on a strong dollar. The dollar bill will be worth little
> than the cost of printing a dollar. The retired, and those living on a fixed
> income or disability cannot earn more dollars, so inflation hurts them. I
> see no reason to drastically cut their lifestyle to help the millionaires
> and those with huge stock investments whom took huge risks knowing the
> consequences.
>
> Let the greedy bastards that swam way out there against all common
> sense with no life vest SINK on their own. Is see no reason to drown with
> them. If you give them first class tickets on a five star cruise-liner back,
> the next batch of idiots will just swim out further in deeper waters
> expecting the same treatment.
>
> I feel no sympathy for big risk takers that lose. Even less for those at the
> top of the food chain.
> The BEST thing for the future of our free economy is to allow bad businesses
> to sink so the good ones can rise and thrive. There are lots of good
> business men and women out there, they should not be playing second fiddle
> anymore to these big losers.
>
> So what if we go into a recession. I don't think it is such a bad thing that
> people learn to do without a latte every morning for a few years. God knows,
> the last Depression created the greatest generation of people this world has
> ever seen. Maybe we should be building character instead of debt for change.
>
> Best Regards,
>
> Donovan
>
> --- On Sun, 9/21/08, Andreas Schou <ophite at gmail.com> wrote:
>
> From: Andreas Schou <ophite at gmail.com>
> Subject: Re: [Vision2020] Why are we bailing out all these large
> corporations?
> To: "Tom Hansen" <idahotom at hotmail.com>
> Cc: "Vision2020" <vision2020 at moscow.com>
> Date: Sunday, September 21, 2008, 6:24 PM
>
> Tom --
>
> I'm going to have to (probably) agree with Jeff on this one. FDIC only
> insures consumer banks, and SIPC provides a very limited amount of
> protection -- it only insures investors against assets endangered by
> the failure of a brokerage, rather than against the assets themselves
> dropping in value. Neither has a lot to do with the utter market
> collapse that's going on around us right now. Some of it could've been
> prevented by re-regulating the financial markets; other elements have
> always been poorly regulated.
>
> The first problem was the explosion in subprime and exotic mortgages.
> Here, part of the problem was the incentive structure for mortgage
> brokers: individually, they received a commission on the mortgage;
> however, since the mortgage frequently no longer belonged to the
> original broker when the borrower defaulted, they didn't care. So long
> as the housing boom was moving fast enough to get the mortgage off the
> balance sheet by the time it came due, no one cared*.
>
> The second problem was the explosion in the sale of mortgage-backed
> securities. This, essentially, was a trillion-dollar attempt to spin
> straw into gold. Large banks packaged high-risk mortgages together in
> such a way as to -- supposedly -- balance the various risks against
> each other in such a way as to make the investments safe. They then
> leaned on the ratings agencies to rate these securities either AA or
> AAA (essentially, as safe debt to purchase), which they did.  One
> would think that the financial geniuses that run Wall Street would
> know that there's no honest way to make 2 + 2 = 5. But there you have
> it.
>
> Third, leverage. The debt to asset ratio being carried by Wall Street
> was ludicrous. The SEC had granted exemptions for the big five
> investment banks, allowing them to take out loans at anywhere from
> 30:1 to 40:1. Of the five companies granted that exemption, only one
> -- Goldman Sachs -- is still in anything resembling a decent state.
> The higher your leverage, the more you depend on outsmarting the
> market to outrun your debts. Worse, *your* debts are in someone else's
> accounts receivable column. If you drop into bankruptcy,
> congratulations: your creditors can all take the number in their
> accounts receivable and divide it by the amount to which you're
> leveraged. This causes ripple effects across the entire financial
> sector.
>
> I've got no problem with the government spending taxpayer money to
> bail out Wall Street. The CDOs (mortgage-backed securities) that the
> government is thinking of purchasing probably do have some underlying
> value. But if we're going to be buying a ton of bad debt, we should be
> canny consumers: we don't take on $700 billion worth of debt without
> getting something in return. An equity stake in every company from
> whom we buy CDOs should be fine. The US taxpayer having a seat on the
> board of directors of every major Wall Street firm would also provide
> an elegant solution to the regulation problem: each firm is regulated
> (by a federal trustee) to the extent it couldn't keep its own house in
> order*.
>
> -- ACS
>
> * Incidentally, despite what John McCain's commercials might be
> telling you, Fannie Mae and Freddie Mac had very little to do with
> this business. The definition of a 'subprime mortgage' is a mortgage
> which neither Fannie nor Freddie would take. Fannie and Freddie's
> problems were largely caused by (a) investor panic, (b) their
> attempts, while wearing their 'private corporation' hats, to compete
> at a level of risk higher than they ought to've, and (c) a massive
> liquidity crisis caused by everyone wanting to sell mortgages and no
> one willing to buy.
>
> ** Also incidentally, as a US taxpayer, you might be happy to know
> that since the AIG bailout, you now own a one-three-hundred-millionth
> stake in Manchester United, which I am told is a soccer team. They
> used to be a property of AIG: now they're yours. They're quite
> good.\
>
> On Sun, Sep 21, 2008 at 5:35 PM, Tom Hansen <idahotom at hotmail.com> wrote:
>> Paul -
>>
>> It is my impression that this economic crapshoot was instigated by
>> deregulation of the industry under both Reagan and Bush Sr..
>>
>> It used to be that it was difficult (stringent requirements and constant
>> federal monitoring) for banks, S&Ls, and other financial institutions
> to
>> qualify for FDIC/FSLIC "protection".  Once Reagan removed these
> requirements
>> and Bush Sr. drastically limited (if not eliminated) federal
>> monitoring, banks approved loans to people/businesses that possessed no
>> viable capability of ever repaying the loans and investment firms made
>> investments that would make third-world countries cringe.  These financial
>> institutions were not concerned about going "out of business",
> not as long
>> as they had that FDIC/FSLIC sticker on their doors.
>>
>> So, as Bush Jr. tries to pass himself and potentially McCain (who
>> coincidentally has been in the Senate since Nixon left the White House) as
>> heroes to the American people, remember who made this all possible.  Hint:
>> It wasn't Obama.
>>
>> Tom Hansen
>> Moscow, Idaho
>>
>>
>>
>>
>> ________________________________
>>> Date: Sun, 21 Sep 2008 16:59:05 -0700
>>> From: godshatter at yahoo.com
>>> To: vision2020 at moscow.com
>>> Subject: [Vision2020] Why are we bailing out all these large
> corporations?
>>>
>>> If a large corporation is about to go bankrupt because they loaned
> money
>>> without proper collateral behind it and without a determination that
> the
>>> person taking out the loan could reasonably pay it back, shouldn't
> we
>>> let it crash and burn? Isn't that what is so casually referred to
> as a
>>> "market correction"?
>>>
>>> I've heard it stated that there is something different about this
>>> situation - it's more dire and it could have a snowball effect on
> the
>>> rest of the economy or even the globe. Does anyone here know enough
>>> about this to explain that?
>>>
>>> What is so important about this situation that would result in the
>>> necessity for an Iraq War-sized expenditure?
>>>
>>> Or is it a case of the rich looking out for the rich, which I'm
>>> half-tempted to believe is the case.
>>>
>>> Paul
>>>
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>>
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