Let the selloff begin

[MacNut]

Bail out bill fails dow down 500.

[BigHungry04]

Glad I got out of the stock market when I did. I was actually doing well until right before I left the market in August. I had Lockheed Martin, Budweiser, ExxonMobile, BP, GE, Johnson & Johnson, IBM, and other stocks that I don't remember at the time. I only left the market because I was going back to school and needed the cash.

In a recession people drink, I know I do, so Beer stocks are probably a good bet, we're in a war, so military hardware is also a good bet, gas prices are up, so oil companies are a good bet. Just remember, don't invest what you can not afford to lose.

[rdowns]

The worst part is watching the Republicans, and now the Democrats on TV playing politics. I have 6 words for members of Congress...

Get the eff back to work.

[MacNut]

Both sides are out of touch. If they think the american voter is going to agree to a $700 billion bailout that won't help the average citizen. I would vote out every person that voted for it.

[freeny]

i thought mccain saved the day??? :confused:

[bradl]

i thought mccain saved the day??? :confused:

Epic Fail? :D

BL.

[fivepoint]

Ahhh... the markets responding negatively to something. Reminds me of what happened after each time the Fed tried to get interest rates back to sustainable levels and stop dropping them to meet the demands of Wall Street.


Ron Paul, Sept. 29
http://www.campaignforliberty.com/blog/?p=642
http://www.youtube.com/watch?v=YBVB1Uc0nko



In conclusion, there are three good reasons why Congress should reject this legislation:

a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.

b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.

c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.

Monetary reform will eventually come, but, unfortunately, Congress’ actions this week make it more likely the reform will come under dire circumstances, such as the midst of a worldwide collapse of the dollar. The question then will be how much of our liberties will be sacrificed in the process. Just remember what we lost in the aftermath of 9-11.

The best result we can hope for is that the economic necessity of getting our fiscal house in order will, at last, force us to give up our world empire. Without the empire we can then concentrate on rebuilding the Republic.

[kavika411]

The market drop appears to be accelerating, getting faster and faster.

[rdowns]

The market drop appears to be accelerating, getting faster and faster.

Not surprising. Investors see no leadership.

The President failed to lead and put forth a hastily put together plan.

Pelosi gets up on the floor of the House and slams Republicans before the vote.

Pansy Republicans claim they had the votes until Pelosi's speech.

McCain, you know, the guy who wanted credit for the passage has been silent. Guess he doesn't want to share the blame.

Obama basically silent on this other than politics.

From what I can tell, the Republicans killed this.

They need to get back to the drawing board and put together a group of financial people to lead this effort. People like Warren Buffet, Michael Bloomberg, Mitt Romney.

[bradl]

They need to get back to the drawing board and put together a group of financial people to lead this effort. People like Warren Buffet, Michael Bloomberg, Mitt Romney.

I read a comment this morning that made absolute sense. And it would, because the person who wrote it is just a normal commoner like the rest of us, not a politician. I'll try to make it short. Enjoy this little something to think about.


I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.. So divide 200 million adults 18+ into $85 billion that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free. So let's assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00. What would you do with $297,500.00 to $595,000.00 in your family?

Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we're going to redistribute wealth let's really do it...instead of trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President. If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!

As for AIG - liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't. Sure it's a crazy idea that can "never work." But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion We
Deserve It Dividend more than I do the geniuses at AIG or in Washington
D.C.

And remember, The Family plan only really costs $59.5 Billion because
$25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh...I feel so much better getting that off my chest.


BL.

[atszyman]

I read a comment this morning that made absolute sense. And it would, because the person who wrote it is just a normal commoner like the rest of us, not a politician. I'll try to make it short. Enjoy this little something to think about.



BL.

Unfortunately their math is way off.

$85,000,000,000/200,000,000=$425 which is about 1000x off what the article quoted, someone added a comma and 3 zeros to their math...

$425 not nearly enough to do anything worthwhile... and hardly enough to put a dent in most people's 401k losses...

[balamw]

So divide 200 million adults 18+ into $85 billion that equals $425,000.00

Too bad that we don't live in the UK, in which case that math would be OK. In the US we define a billion as 1,000 million.

So $85B=$85,000M do divide by 200M people and you are left with $425 per adult.

B

[mactastic]

No one facing a competitive election in 5 weeks wants to put their neck on the line for this one, and I can't say I blame them.

Good on the HoR.

Question is, what happens next? Members of Congress are itching to get back to their districts because they need to get campaigning. Will Congressional leadership keep them in session, or will they be adjourn to allow them to leave town? Will alternate plans now be considered? Or can this plan be tweaked enough to attract the relatively few more votes needed for passage?

Problem is, 5 weeks is too close to election day for anyone to want to stick their necks out over this, and it's too far away from election day to allow this to remain unresolved until afterwards when cooler heads might prevail.

I wonder if Palin is going to say that now she can't debate Biden unless there is some resolution to this before Thursday...

[freeny]

McCain was bragging about himself on this matter earlier today in Ohio. This was of course before the failed vote.

[KingYaba]

So this is what if feels like? I'm impressed! For once! I'm actually impressed!

Expect gas prices to go down. Oil fell below $100 a barrel today. link (http://www.breitbart.com/article.php?id=D93GIS200&show_article=1)

Here's the full vote tally (http://clerk.house.gov/evs/2008/roll674.xml).

[MacNut]

I like how Pelosi tried to pass all the blame to the Reps when 100 Dems voted it down as well.

[freeny]

I like how Pelosi tried to pass all the blame to the Reps when 100 Dems voted it down as well.

if one democrat voted against this the republicans would have blamed them :rolleyes:

133 republican voted nay.
Logic will prevail ;)

[mactastic]

Wasn't McCain supposed to be working to deliver the necessary votes to get this passed? It appears he can't even get the GOP to work with him, let alone the Democrats.

If you can't lead your own caucus, who can you lead?

[MacNut]

Wasn't McCain supposed to be working to deliver the necessary votes to get this passed? It appears he can't even get the GOP to work with him, let alone the Democrats.

If you can't lead your own caucus, who can you lead?Because the rest of the caucus wants to get reelected as well. If they vote yes it is suicide.

[freeny]

Because the rest of the caucus wants to get reelected as well. If they vote yes it is suicide.

bingo

[kavika411]

if one democrat voted against this the republicans would have blamed them :rolleyes:

133 republican voted nay.
Logic will prevail ;)

I don't disagree with you, but I think either side can effortlessly blame the other. From http://campaignspot.nationalreview.com/post/?q=MjkxYjhkMjM2ODY2YzJjNTAwZjFkYmEwOTA4NGJiOGU=

"Pelosi's Excuses Are Garbage

Pelosi, moments ago: "The Democrats more than lived up to their side of the bargain."

Horsepuckey. Pelosi has 235 members. She needed 218. She could spare 17 members and still pass the bill.

The GOP spotted her 65 members, for a bill that made most Republicans' skin crawl in both broad outline and in terms of detail.

That meant Pelosi could afford to lose 82 Democrats.

She lost 95."

[Peace]

This vote was done for political reasons anyway so it doesn't matter.

As of right now AAPL is up in after hours trading. It's them greedy stock brokers taking advantage of the downturn.

Until the Banking industry is regulated this will continue to happen.

[freeny]

I don't disagree with you, but I think either side can effortlessly blame the other. From http://campaignspot.nationalreview.com/post/?q=MjkxYjhkMjM2ODY2YzJjNTAwZjFkYmEwOTA4NGJiOGU=

"Pelosi's Excuses Are Garbage

Pelosi, moments ago: "The Democrats more than lived up to their side of the bargain."

Horsepuckey. Pelosi has 235 members. She needed 218. She could spare 17 members and still pass the bill.

The GOP spotted her 65 members, for a bill that made most Republicans' skin crawl in both broad outline and in terms of detail.

That meant Pelosi could afford to lose 82 Democrats.

She lost 95."

Thats the fuzziest logic i think ive ever seen.

[kavika411]

Thats the fuzziest logic i think ive ever seen.

I don't think it's logic as much as it's just math.

But like I said above, either side will be able to effortlessly blame the other. Ought to be fun to watch the spinning.

[BoyBach]

My brother phoned me and told me put on the BBC news. So I sat there and watched the bill fail, the politicians revert to type - blame each other - and the markets go into free fall.

It was all quite amusing in a gallows humour kind of way.

I can't wait to see how the Asian and European markets react when they open. It'll be fun! :rolleyes:

[atszyman]

I don't think it's logic as much as it's just math.

But like I said above, either side will be able to effortlessly blame the other. Ought to be fun to watch the spinning.

The only way this would have passed without any political repercussions would have been a unanimous vote.

At this point anyone who votes against it will be accused of wanting the economy to fail, anyone who votes for it will be lambasted for wasting tax payers money.

It would have been nice to get a near unanimous vote so that the politics would be removed and neither party could attack the other.

Of course I'm still of a split mind on the bailout, so I'm not sure which way I'd be happier with a near unanimous vote.

[dmr727]

Are any of you moving your investments around? I'm younger, so my 401K is pretty heavily invested in the stock market. Should I cut my losses and go conservative for the time being, or ride it out?

[Dont Hurt Me]

Wasn't McCain supposed to be working to deliver the necessary votes to get this passed? It appears he can't even get the GOP to work with him, let alone the Democrats.

If you can't lead your own caucus, who can you lead?Sarah,Sarah, no time is a good time for goodbye.;)

[CorvusCamenarum]

Are any of you moving your investments around? I'm younger, so my 401K is pretty heavily invested in the stock market. Should I cut my losses and go conservative for the time being, or ride it out?

How young is young? I'd probably get out of the financials, but if you're say under 30 or so, just ride it out. You're looking to keep this money cooking for the next 3 or 4 decades.

[kavika411]

Of course I'm still of a split mind on the bailout, so I'm not sure which way I'd be happier with a near unanimous vote.

I think we're brothers in a distant world somewhere, atszyman. For days my position has been that I - emotionally - want the bill to pass so that there is a feeling of stability, all the while I have wanted - intellectually - the bill to fail, because I think it is attempting to drink a hangover a little further into the future, which never works. Right now the emotional side of me is disappointed it failed, but the calmer part of me is glad.

[dmr727]

How young is young? I'd probably get out of the financials, but if you're say under 30 or so, just ride it out. You're looking to keep this money cooking for the next 3 or 4 decades.

I'm 30, and plan to retire at 65. My brain is telling me to just relax and ride the wave, but I must admit I'm a bit spooked.

[MacNut]

I'm 30, and plan to retire at 65. My brain is telling me to just relax and ride the wave, but I must admit I'm a bit spooked.While it might look like a black hole right now in the long term this is just a dimple. The markets will always even out.

[Queso]

I'm 30, and plan to retire at 65. My brain is telling me to just relax and ride the wave, but I must admit I'm a bit spooked.
30? You have nothing to worry about. Keep investing whilst fund units are cheap.

It's those in their late 50s and above that need to be worried...

[Agathon]

I'm 30, and plan to retire at 65. My brain is telling me to just relax and ride the wave, but I must admit I'm a bit spooked.

Someone who was your age in 1914 would have been set to live through two world wars and a depression and would have retired at 65 at the beginning of the long boom.

The point is that it's unlikely that the world economy will look anything like what it does now when you retire. For one, the Chinese will probably be running the show.

People like to think they have control over this. The reality is that you don't, and you just have to accept that.

[freeny]

I don't think it's logic as much as it's just math.

But like I said above, either side will be able to effortlessly blame the other. Ought to be fun to watch the spinning.

so the republicans are saying, "were going to vote against you anyway, reguardless of the ramifications, reguardless of the seriousness of the issue. Your lucky to get a third of our votes."?

[abijnk]

Thats the fuzziest logic i think ive ever seen.

Fuzzy logic? It's a basic fact that the democrats could have passed this all by themselves. No logic need be involved.

[hulugu]

I don't think it's logic as much as it's just math.

But like I said above, either side will be able to effortlessly blame the other. Ought to be fun to watch the spinning.

If we could only somehow harness the spinning into energy. We need some kind of politician-powered hamster wheel and I'm sure we could light up a significant portion of the east coast.

I read a comment this morning that made absolute sense. And it would, because the person who wrote it is just a normal commoner like the rest of us, not a politician. I'll try to make it short. Enjoy this little something to think about....

The math doesn't work. If you take the $700 billion for the current bailout request and divide it by the number of American households of 110 million (according to US census data) in 2000 (close enough), you end up with $6363.64. Even if we knocked off the top 20%, we'd have $7,954.55.

Of course, to write checks to 110 million households would surely cost a kingly sum, so each household wouldn't get the full amount. I'm not sure how much the last rebate cost in administration fees, but the total was $152 Billion.

[IJ Reilly]

30? You have nothing to worry about. Keep investing whilst fund units are cheap.

It's those in their late 50s and above that need to be worried...

Not even. I'm in my early 50s. I have been working, saving and investing for 30 years, looking forward to not having to work quite so much by the time I reached my early 60s if not sooner. I'd been closing in on that goal. Now it's hardly more than a tiny spec on the horizon.

Remember, those of us who've been at this for some time are living through the second big equity crisis is under ten years time. We're not exactly brimming with confidence that it's all going to work out fine if we only sit tight and wait it out.

[OutThere]

The point is that it's unlikely that the world economy will look anything like what it does now when you retire. For one, the Chinese will probably be running the show.

Not if we reach peak oil production and the US stops buying their cheap plastic products. :p

[takao]

tomorrow sure is going to get interesting with the markets in asia and europa going to get hit hard ... especially with already banks being in trouble around here as well (luckily still more focused on the investment banks and less on the the traditional ones)

the austrian ATX lost already 8% today ... which means tomorrow gonna be a race towards the double digits ... in red

[Agathon]

Not if we reach peak oil production and the US stops buying their cheap plastic products. :p

By that time their internal economy and that of the Indians will be enough to sustain them.

What people don't realize is that only a small percentage of Chinese and Indians need to achieve western middle class incomes before they are the world's biggest consumer class – there are just that many of them.

Unless people in Western countries are planning on having seven or eight kids each, that is the way it is going to be.

[Agathon]

tomorrow sure is going to get interesting with the markets in asia and europa going to get hit hard ... especially with already banks being in trouble around here as well (luckily still more focused on the investment banks and less on the the traditional ones)

the austrian ATX lost already 8% today ... which means tomorrow gonna be a race towards the double digits ... in red

I love the smell of capitalism burning in the morning. ;)

[Macaddicttt]

I don't think it's logic as much as it's just math.

But like I said above, either side will be able to effortlessly blame the other. Ought to be fun to watch the spinning.

No, it's not just math it's also logic. Sure, the Democrats could have passed this bill by themselves. Yes, that's just math.

The logic part is calling Pelosi's excuses "garbage." Follow this logic:

The Democratic leadership and the Republican leadership made a deal. They said, "Get a majority of your guys to vote for this, and I'll get a majority of my guys to vote for it." The Democrats delivered, the Republicans didn't. This wasn't a partisan bill, it was a bipartisan bill. $10 says that had the Democrats passed this all by themselves, you'd be crying foul about how it should have been a bipartisan deal. The Democrats tried to be bipartisan, and the Republicans failed. Period.

[abijnk]

No, it's not just math it's also logic. Sure, the Democrats could have passed this bill by themselves. Yes, that's just math.

The logic part is calling Pelosi's excuses "garbage." Follow this logic:

The Democratic leadership and the Republican leadership made a deal. They said, "Get a majority of your guys to vote for this, and I'll get a majority of my guys to vote for it." The Democrats delivered, the Republicans didn't. This wasn't a partisan bill, it was a bipartisan bill. $10 says that had the Democrats passed this all by themselves, you'd be crying foul about how it should have been a bipartisan deal. The Democrats tried to be bipartisan, and the Republicans failed. Period.

Gosh, the more I think about this the more I think you are right. If the dems HAD passed this all on their own the republicans would have spun it to no end.

The bill is going to be unpopular no matter what, so its going to take some balls to get it passed.

[Thomas Veil]

Despite high-minded denials to the contrary, a large portion of this negative vote has got to to be ass-covering by politicians who are not anxious to be seen bailing out Wall Street at the expense of Main Street (to use the colloquialism du jour). They want to get re-elected, after all.

To be sure, there are some (http://www.thenation.com/blogs/campaignmatters/365657/an_appropriately_populist_anti_bailout_rant) who object to the whole idea purely on ethical grounds:

On the floor of House Sunday, (Rep. Dennis) Kucinich declared that:

The $700 billion bailout for Wall Street, is driven by fear not fact. This is too much money in too a short a time going to too few people while too many questions remain unanswered. Why aren't we having hearings on the plan we have just received? Why aren't we questioning the underlying premise of the need for a bailout with taxpayers' money? Why have we not considered any alternatives other than to give $700 billion to Wall Street? Why aren't we asking Wall Street to clean up its own mess? Why aren't we passing new laws to stop the speculation, which triggered this? Why aren't we putting up new regulatory structures to protect investors? How do we even value the $700 billion in toxic assets?

Why aren't we helping homeowners directly with their debt burden? Why aren't we helping American families faced with bankruptcy. Why aren't we reducing debt for Main Street instead of Wall Street? Isn't it time for fundamental change in our debt based monetary system, so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the United States Congress or the board of directors of Goldman Sachs? Wall Street is a place of bears and bulls. It is not smart to force taxpayers to dance with bears or to follow closely behind the bulls.And to be sure, the bailout bill can't be the only way (http://www.thenation.com/doc/20081013/kvh_schlosser) to fix this thing:

What we really need is a new New Deal: a systematic approach to the financial and economic problems of the United States.

Firstly, we need relief for ordinary Americans. At the moment, four million households are behind on their mortgage payments and facing foreclosure. Some estimates suggest that an additional two million may face eviction next year.

On Wednesday in the Wall Street Journal, Sen. Hillary Clinton called for a revival of the Home Owner's Loan Corporation (HOLC). Organized in the early months of the New Deal, the HOLC avoided widespread foreclosures by purchasing troubled mortgages from banks and then reissuing them with more favorable terms. It proved a tremendous success -- for homeowners, taxpayers and banks.

A new HOLC should be created immediately, and with the power to keep people in their homes.

As winter approaches, millions of families will need help keeping those homes warm. During the past year, the cost of heating oil has increased about 30 percent. Meanwhile, the Bush administration is now trying to cut funding for the Low Income Energy Assistance Program. Instead of cutting, the federal government should more than double the current budget of $2.6 billion. That is awfully small change on Wall Street these days.

Second, we need reform. In recent years, one federal regulatory agency after another has been handed over to the industries they were created to regulate. It should come as no surprise that during the Bush administration the US has witnessed the largest recall of contaminated beef in its history, thousands of deaths from unsafe prescription drugs, and one of our worst financial meltdowns.

Advocates of the free market must confront the fact that both the Great Depression and the current financial chaos were preceded by years of laissez-faire economic policies. Strictly enforced regulations not only protect consumers, they protect companies that behave ethically from those that don't. The sale of tainted baby food in China demonstrates, once again, that when industries are allowed to police themselves, there's absolutely no limit on what they'll do for money.

Third, we need reconstruction, not only of America's physical infrastructure, but also of its society. Today close to 50 million Americans lack health insurance. About 40 percent of the nation's adult population is facing medical debts, or having difficulty paying medical bills. A universal health-care system would help American families, while cutting the nation's long-term health-care costs. And a large-scale federal investment in renewable energy and public-works projects would build the foundation for a strong 21st century economy.

Contrary to the myth of the free market, direct government intervention has played a central role throughout American economic history, subsidizing the growth of the railroad, automobile, aerospace and computer industries, among others. It will take well-planned government investment to break our dependence on foreign oil and create millions of new Green jobs.The true irony, of course, would be if it cost considerably less than $700 billion to implement a plan like this.

What is most amazing to me is not that this kind of plan isn't being brought to the floor of Congress, it's that nobody is even proposing such a thing. Are we still, after all that's happened, so brainwashed that we believe that the only solution must be a "top-down" one instead of a "bottom-up" one?

[freeny]

So now what i hear from the tv is the reason the democrats did not vote unanimously was to force republicans to join in on the vote and have a unilateral decision on this. since it did not happen the democrats will return to the drawing board, write up a bill that favors them and democratic voters and force it down the throats of the republicans because they can pass it without them.

[abijnk]

So now what i hear from the tv is the reason the democrats did not vote unanimously was to force republicans to join in on the vote and have a unilateral decision on this. since it did not happen the democrats will return to the drawing board, write up a bill that favors them and democratic voters and force it down the throats of the republicans because they can pass it without them.

Interesting, are there any stories out in print? (I'm not disbelieving you, I'd just like to read what's being said :o)

[skunk]

So now what i hear from the tv is the reason the democrats did not vote unanimously was to force republicans to join in on the vote and have a unilateral decision on this.I think you mean bilateral...

[freeny]

Interesting, are there any stories out in print? (I'm not disbelieving you, I'd just like to read what's being said :o)

nope, just what I heard on CNN.
I would assume that if there is meat to the story of will be in print soon...

[kavika411]

$10 says that had the Democrats passed this all by themselves, you'd be crying foul about how it should have been a bipartisan deal.

I'm not crying foul about jack. Before posting next time, learn how not to read your own assumptions into another person's post, especially when they are making the point on both sides.

Heck, just learn how to read.

[MacNut]

So now what i hear from the tv is the reason the democrats did not vote unanimously was to force republicans to join in on the vote and have a unilateral decision on this. since it did not happen the democrats will return to the drawing board, write up a bill that favors them and democratic voters and force it down the throats of the republicans because they can pass it without them.Ya that will really get the support of the American people.

[Ugg]

Ya that will really get the support of the American people.

If it saves them $400 billion dollars, hey, why not!

[MacNut]

If it saves them $400 billion dollars, hey, why not!I think a lot of people are fed up with bailout plans of any kind.

[Khryz]

Is now the best time to buy stocks?

[MacNut]

Is now the best time to buy stocks?Wait a few weeks. Don't be surprised if the markets fall further.

[Agathon]

What is most amazing to me is not that this kind of plan isn't being brought to the floor of Congress, it's that nobody is even proposing such a thing. Are we still, after all that's happened, so brainwashed that we believe that the only solution must be a "top-down" one instead of a "bottom-up" one?

What's amazing about it? If you were a major campaign contributor, then they'd look out for your interests. As you are not, you get "good government".

Like lambs to the slaughter.

[bobber205]

Maybe we should be applauding The Dems and Reps that had the huge balls it took to vote for this? They obviously care more about the country than their political future. :D

[rasmasyean]

Are any of you moving your investments around? I'm younger, so my 401K is pretty heavily invested in the stock market. Should I cut my losses and go conservative for the time being, or ride it out?

In general, you should try to make you're own decisions on your own research (or hire a professional if you believe in them more). If you want to play around and see how you can "profit" from this by certain moves, there are no guarantees anyone can give you really.

But if it's any comfort, I started working in "wall-street" a few years before...
http://en.wikipedia.org/wiki/Asian_financial_crisis

And I don't even remember what happened there, now.

[pseudobrit]

Is now the best time to buy stocks?

A few. Not for most of them.

Are any of you moving your investments around? I'm younger, so my 401K is pretty heavily invested in the stock market. Should I cut my losses and go conservative for the time being, or ride it out?

Smart money got out a long time ago. I got out halfway to a long time ago and put it all in Treasury notes and bonds, where it's been relatively unscathed.

Scared money always loses, and now's the time to be scared about having money in the market. There's so much manipulation going on at so many different levels that you'll never be able to use fundamentals to guide your investments in either direction. At this point you might as well let it ride and learn the lesson for the next bubble.

[Rodimus Prime]

A few. Not for most of them.



Smart money got out a long time ago. I got out halfway to a long time ago and put it all in Treasury notes and bonds, where it's been relatively unscathed.

Scared money always loses, and now's the time to be scared about having money in the market. There's so much manipulation going on at so many different levels that you'll never be able to use fundamentals to guide your investments in either direction. At this point you might as well let it ride and learn the lesson for the next bubble.



Smart money did not get out a long time ago. You played it safe. The smart move is to based it on the point in your life and how much you can risk having your funds drop on you.

You clearly are older in life therefor needed to reduce your risk.

The guy asking the quetions is like me. 25 years old. The smart move is to remember the market History. It historically climbs 9% or more a year over the long term. Short term yeah it can have huge drops but generally speaking over the course of a few years any loses are a wash and long term gains always seem to hold very true.

I would say if you are under 30 just remember you are under 30 and have a long time to go. The markets history will hold true and your investment will grow. Do not stress over this unless you are with in 10 years of retirement. I know I am not going to worry about the money I have put into my 401K this year.

[pseudobrit]

Smart money did not get out a long time ago. You played it safe. The smart move is to based it on the point in your life and how much you can risk having your funds drop on you.

You clearly are older in life therefor needed to reduce your risk.

The guy asking the quetions is like me. 25 years old. The smart move is to remember the market History. It historically climbs 9% or more a year over the long term. Short term yeah it can have huge drops but generally speaking over the course of a few years any loses are a wash and long term gains always seem to hold very true.

I would say if you are under 30 just remember you are under 30 and have a long time to go. The markets history will hold true and your investment will grow. Do not stress over this unless you are with in 10 years of retirement. I know I am not going to worry about the money I have put into my 401K this year.

I am under 30, and I would have watched my retirement account shrink by more than 25% if I had stayed in stocks. I sold into a rally after the BSC collapse in anticipation of a lengthy bear market. As I continue to invest, I am buying back into stocks, and I will have preserved my account balance for future reinvestment into equities once the markets stabilize.

Of course, I took a risk with this strategy, but I don't consider it an uninformed gamble, and wouldn't recommend such investment manoeuvring for everyone.

[atszyman]

I would say if you are under 30 just remember you are under 30 and have a long time to go. The markets history will hold true and your investment will grow. Do not stress over this unless you are with in 10 years of retirement. I know I am not going to worry about the money I have put into my 401K this year.

That assumes you get to keep your job. With a slowing economy the credit crunch will result in businesses not growing as fast or as much since loans will be harder to come by and credit won't be as freely available. This could lead to even higher unemployment which would lead to an even slower economy and the downward spiral continues...

Of course that's the part of me that wants the bailout to happen (of course even that part of me is in conflict wondering why it is that fixing the problem from the bottom up isn't even a consideration).

The other part of me is saying, screw the idiots who extended the loans and built risky investments based on a housing bubble almost every sane person saw bursting soon. If you don't want to assume the risk don't buy into the market. Of course surreptitiously our financial advisor left his old company last Summer and we followed him, since the economy was starting to slow then, most of our stuff ended up in money market and insured cash accounts, where it still sits waiting for the right time to start staging it back into the markets.

As long as we manage to keep health insurance at an affordable level my family and I will be fine, but I'd really rather not watch the economy start spiraling into the abyss.

The spiral is only one way it could happen, and a fairly pessimistic view, but I'd rather think pessimistic and plan for the worst and be surprised than be caught with my pants down thinking everything is going to be OK.

What a fun time to live in!

[Rodimus Prime]

That assumes you get to keep your job. With a slowing economy the credit crunch will result in businesses not growing as fast or as much since loans will be harder to come by and credit won't be as freely available. This could lead to even higher unemployment which would lead to an even slower economy and the downward spiral continues...

Of course that's the part of me that wants the bailout to happen (of course even that part of me is in conflict wondering why it is that fixing the problem from the bottom up isn't even a consideration).

The other part of me is saying, screw the idiots who extended the loans and built risky investments based on a housing bubble almost every sane person saw bursting soon. If you don't want to assume the risk don't buy into the market. Of course surreptitiously our financial advisor left his old company last Summer and we followed him, since the economy was starting to slow then, most of our stuff ended up in money market and insured cash accounts, where it still sits waiting for the right time to start staging it back into the markets.

As long as we manage to keep health insurance at an affordable level my family and I will be fine, but I'd really rather not watch the economy start spiraling into the abyss.

The spiral is only one way it could happen, and a fairly pessimistic view, but I'd rather think pessimistic and plan for the worst and be surprised than be caught with my pants down thinking everything is going to be OK.

What a fun time to live in!

I dont have to keep my job for the investment to pay off. the money is there and I am currently over the limit where they are required by law if I leave the company I can leave the money in their until my choosing but the point being the money staying in there (all 2k of it) will continue to grow and long haul will grow around 9-10% per year average.

As for the credit crunch I agree with how you view it. The people who screwed up should eat it but the tighting credit lines directly puts my job at risk because I am in construction that means less can be done with less money to do it.

Something needs to be done but the question is always going to be what. This problem is already spread world wide with the tightening credit markets. It is not just the companies in the US that got greedy but world wide as a lot of world banks are having to write stuff done. We are watching huge banks fall world wide. Something wrong and it shows greed is not just trapped in the US but it clearly world wide.

[thechidz]

and once again Ron Paul is right... it's too bad so many people just act like sheep

[atszyman]

I dont have to keep my job for the investment to pay off. the money is there and I am currently over the limit where they are required by law if I leave the company I can leave the money in their until my choosing but the point being the money staying in there (all 2k of it) will continue to grow and long haul will grow around 9-10% per year average.

The only problem is leaving that money alone when you're unemployed.

Sure if you manage to keep your head above water you may not have to touch it but if the crunch is bad and the economy spirals, you may need to use that 401k money to keep shelter over your head and food in the refrigerator.

Although if things get that bad the one bright point that might possibly be there, I could see the government dropping the penalties for early withdrawal from retirement accounts for people who really need it.

Thomas Veil and Slate's Political Gabfest (http://www.slate.com/id/2199550/) both raise a good question. If the market collapse is due to the bad debt being traded on Wall Street, what would happen if the government helped those who were stuck with the debt rather than the fat-cats who traded it? Wouldn't that make the bad debt into good debt and solve most of the problem? Could that be done for less than $700 billion? Why are we not even considering such an option? Would it be possible for the government to come in and pay some percentage of someone's mortgage payment for that same percentage stake in the equity of the house (at least the government would get a good chunk of the money back)? Why does it seem like these options aren't even being considered?

[SactoGuy18]

The market will stop its selloff if the Feds would just implement a five-point plan I suggested:

1) Create the equivalent of the Resolution Trust Corporation to buy up and sell off in an organized manner all the bad mortgage loans.
2) Temporarily suspend the mark-to-market valuation section of the Sarbanes-Oxley Act (that right there would clean up 80% of the mess, according to some estimates).
3) Impose strict margin requirements on any derivative or hedge fund trade--30% at minimum. That right there will discourage the type of out-of-control speculation that drove up the price of oil to ridiculous levels earlier this year and drove down the price of financial stocks through naked short selling recently.
4) Break up both Freddie Mac and Fannie Mae into 12 competing companies that have NO direct Federal involvement.
5) In the longer run, throw out our current Federal income tax system and start over from scratch with the consumption-based FairTax system.

[Agathon]

Thomas Veil and Slate's Political Gabfest (http://www.slate.com/id/2199550/) both raise a good question. If the market collapse is due to the bad debt being traded on Wall Street, what would happen if the government helped those who were stuck with the debt rather than the fat-cats who traded it?

Are you crazy, or a communist? Who do you think finances political campaigns?

Wouldn't that make the bad debt into good debt and solve most of the problem? Could that be done for less than $700 billion? Why are we not even considering such an option?

The sane answer is because putting the money into keeping the people who have some idea of how the financial system works in their jobs is better than paying off the mortgages of non-experts and then watching the financial system slide into ruin.

We've collectively bought into a state of affairs where the movement of money is controlled by a very few people who have the expert financial knowledge. If you want to impoverish them, then good luck. It would be like impoverishing every farmer in the nation and then expecting food to appear in your supermarket, or worse still forcing all the farmers off the land and sending city folks to farm it.

Would it be possible for the government to come in and pay some percentage of someone's mortgage payment for that same percentage stake in the equity of the house (at least the government would get a good chunk of the money back)? Why does it seem like these options aren't even being considered?

Because the financial class have made themselves indispensable to the functioning of our societies. They have us by the short and curlies and they know that we will have to bail them out. We can fire some of them, but we can't fire all of them or even most of them. They know this, and so they are quite happy to take risks with our economy to enrich themselves.

And you thought feudal lords were bad.

[atszyman]

Are you crazy, or a communist? Who do you think finances political campaigns?

I'm pretty sure it's just plain crazy, I took the World's Smallest Political Quiz (http://www.theadvocates.org/quizp/index.html) and hit the border squarely between Liberal and Libertarian. Of course I'd love to see campaigns 100% publicly financed where each candidate receives the same amount of money to run with and strict monitoring of those funds. If you can't run an effective campaign on a fixed budget, why should we believe you can run the country?

The sane answer is because putting the money into keeping the people who have some idea of how the financial system works in their jobs is better than paying off the mortgages of non-experts and then watching the financial system slide into ruin.

But if we effectively eliminate the "bad debt" does that not get rid of the problem? $700 billion could buy 1.4 million $500,000 homes outright, and I'm only thinking of paying for a percentage of a home, most of which are probably far less than $500,000. Of course, that just softens the landing and that's squarely at odds with the part of me that wants those who took the risks to actually suck up the consequences. I don't try to get my dollar back when my lottery ticket loses, why should investors who were trying to make a quick buck get anything when their gamble fails?

We've collectively bought into a state of affairs where the movement of money is controlled by a very few people who have the expert financial knowledge. If you want to impoverish them, then good luck. It would be like impoverishing every farmer in the nation and then expecting food to appear in your supermarket, or worse still forcing all the farmers off the land and sending city folks to farm it.

If these are the experts we're screwed anyway.


Because the financial class have made themselves indispensable to the functioning of our societies. They have us by the short and curlies and they know that we will have to bail them out. We can fire some of them, but we can't fire all of them or even most of them. They know this, and so they are quite happy to take risks with our economy to enrich themselves.

And you thought feudal lords were bad.

And this is why there's a not so small part of me that wants to see the system fail and let them reap the "rewards" they were so eager to obtain not too long ago.

[Aranince]

Nice to see the market rebound, its up 2.24%.

[IJ Reilly]

Nice to see the market rebound, its up 2.24%.

It's the classic dead cat bounce. There's nothing in the news to rally the markets except the glimmer of hope that Congress will revive the bailout plan in some modified form, and act on it before the weekend. If they don't, and even if they do, the bottom could still be a long way off and a long way further down.

[takao]

It's the classic dead cat bounce. There's nothing in the news to rally the markets except the glimmer of hope that Congress will revive the bailout plan in some modified form, and act on it before the weekend. If they don't, and even if they do, the bottom could still be a long way off and a long way further down.

actually a bit of the rebounds accounts to some rumours about the ECB dropping base interest rates

[IJ Reilly]

actually a bit of the rebounds accounts to some rumours about the ECB dropping base interest rates

Grasping at glimmers of hope then. The problem is that lowering central bank rates doesn't do much good when the banks won't even lend money to each other. As of today, those rates are 5% above the prime rate.

[rasmasyean]

I'm pretty sure it's just plain crazy, I took the World's Smallest Political Quiz (http://www.theadvocates.org/quizp/index.html) and hit the border squarely between Liberal and Libertarian. Of course I'd love to see campaigns 100% publicly financed where each candidate receives the same amount of money to run with and strict monitoring of those funds. If you can't run an effective campaign on a fixed budget, why should we believe you can run the country?



But if we effectively eliminate the "bad debt" does that not get rid of the problem? $700 billion could buy 1.4 million $500,000 homes outright, and I'm only thinking of paying for a percentage of a home, most of which are probably far less than $500,000. Of course, that just softens the landing and that's squarely at odds with the part of me that wants those who took the risks to actually suck up the consequences. I don't try to get my dollar back when my lottery ticket loses, why should investors who were trying to make a quick buck get anything when their gamble fails?



If these are the experts we're screwed anyway.




And this is why there's a not so small part of me that wants to see the system fail and let them reap the "rewards" they were so eager to obtain not too long ago.


Personally, I rather there be no bailouts, but if there was any, maybe a smaller amount to selective "fat-cats" as you call it.

What you are saying is that it is better to save a few soldiers than a general. While this seems pleasant if you are one of the soldiers or their friend, the general is usually favored because he is "more important" despite that there are more lives in the soldiers ranks, and they are less "well off".

The ultimate decision is based more on trying to solve the problem itself, rather than "charity" or "fairness".

[atszyman]

Personally, I rather there be no bailouts, but if there was any, maybe a smaller amount to selective "fat-cats" as you call it.

And wouldn't eliminating or financing the bad debt to make it good both save the peons and the "fat-cats"? If none of the traded debt were bad we wouldn't be in this mess would we?

What you are saying is that it is better to save a few soldiers than a general. While this seems pleasant if you are one of the soldiers or their friend, the general is usually favored because he is "more important" despite that there are more lives in the soldiers ranks, and they are less "well off".

But by saving the soldiers we're also saving the generals. If the debt that's being traded is no longer "bad debt" and the obligations are being met, we're not risking the generals, and most likely the generals in this case could use a small wound to remind them that not every risk is acceptable.

The ultimate decision is based more on trying to solve the problem itself, rather than "charity" or "fairness".

And how is solving the problem from the bottom up any worse at solving it from the top down? Either way we're padding the risk for those who knowingly entered the market with the risk. At least working from the bottom up might benefit more lower/middle class Americans rather than a few rich Americans. Why isn't this being considered?

[rasmasyean]

And how is solving the problem from the bottom up any worse at solving it from the top down? Either way we're padding the risk for those who knowingly entered the market with the risk. At least working from the bottom up might benefit more lower/middle class Americans rather than a few rich Americans. Why isn't this being considered?

I suppose it depends on your viewpoint. I'm sure there will be regulations in place after this to minimize such similar occurrence in the future. Along with it some "I Told You So" books from authors trying to make a buck. The idea is that "the rich" are the ones that have a better lead on the economy as a whole and can exert more "positive influence" that say...can increase the GDP of the nation, or whatever. Perhaps some others like yourself think that the general populace should move the economy by just "letting it flow".

Just to point out...not everyone who works on "wall street" is "rich". But I assume you're talking about the collective whole. Whether or not they "deserve to perish for their mistakes", we still need some form of structure in place. And it's ideally about helping the economy...not helping the rich or poor or punishing someone.

[atszyman]

I suppose it depends on your viewpoint. I'm sure there will be regulations in place after this to minimize such similar occurrence in the future. Along with it some "I Told You So" books from authors trying to make a buck. The idea is that "the rich" are the ones that have a better lead on the economy as a whole and can exert more "positive influence" that say...can increase the GDP of the nation, or whatever. Perhaps some others like yourself think that the general populace should move the economy by just "letting it flow".

But the Wall Street experts bear more than their fair share of blame for getting us into this mess, and now we want to give them more money to get us out of it?

Just to point out...not everyone who works on "wall street" is "rich". But I assume you're talking about the collective whole. Whether or not they "deserve to perish for their mistakes", we still need some form of structure in place. And it's ideally about helping the economy...not helping the rich or poor or punishing someone.

I know their not all rich, but people who put money into risky investments need to be prepared to lose it. I know this shouldn't be about punishing people, which is why I keep struggling with the whole mess and can't decide if I want the bailout to happen or not.

I can see the economy completely tanking with no bailout, but I can also see that putting the bailout out there might only lead to harsher setbacks down the line as the markets start expecting bailouts when risky endeavors fail.

I see reasons for doing a top-down bailout but it seems that no one is seriously pushing for a bottom up solution, that would affect more people directly and still help those at the top as the bad debt that causing the problem is now honored. The biggest problem I see with a bottom up approach is sorting out those who took advantage of the relaxed loan market versus those who were taken advantage of. The former should suffer their foreclosure and loss, while the latter would be the ones I'd have less of an issue helping.

It's a damn complex problem which the more I think about, the happier I am that the bailout stalled and we have more time to try and come up with a more palatable solution to this mess, not that I'm necessarily going to like whatever we do, but rushing the government is almost never a good idea.

[Macaddicttt]

I see reasons for doing a top-down bailout but it seems that no one is seriously pushing for a bottom up solution, that would affect more people directly and still help those at the top as the bad debt that causing the problem is now honored.

There really isn't a bottom-up solution. :(

The problem is that there isn't enough money flowing, no one can get loans. Giving money to the average Joe isn't going to help anyone get a loan. The "people putting their money into risky investments" are banks. We need the banks to survive, we can't "punish" them for their misdeeds. We need to bail out the system, then put tighter regulation on risk.

The rich are already rich, and those that caused this whole ordeal won't suddenly be poor if we let the banks fail. They'll still be rich. If the super rich lose 10% of their wealth (for example), and one of them loses $3 million, he still has $27 million and will do pretty well for himself. If the banks fail, some companies won't be able to pay their payroll, people lose jobs, and the ones scrimping to pay their mortgages lose their houses.

Now let's be clear that I'm not a fan of the trickle-down theory (i.e. voodoo economics; it's complete BS), but this is a case where we have to save the system or else everyone loses. If this spirals into another Great Depression, who did the worst then? Not the bankers who's banks fail, but the middle class who no longer could get a job and feed their family.

[mactastic]

There really isn't a bottom-up solution.
Sure there is. We could give homeowners the money they need to get upside-up on their loans. Wouldn't be any more fair than giving the money to Wall Street execs, but it IS a bottom-up solution.

But the Wall Street experts bear more than their fair share of blame for getting us into this mess, and now we want to give them more money to get us out of it?
Pun intended? :p

[IJ Reilly]

There really isn't a bottom-up solution. :(

The problem is that there isn't enough money flowing, no one can get loans. Giving money to the average Joe isn't going to help anyone get a loan. The "people putting their money into risky investments" are banks. We need the banks to survive, we can't "punish" them for their misdeeds. We need to bail out the system, then put tighter regulation on risk.

Exactly. Thank you. I came across this quote in an article today:

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. . . . It will purge the rottenness out of the system." -- Andrew Mellon, Herbert Hoover's Treasury secretary

When is it time to try a cure worse than the disease?

[atszyman]

There really isn't a bottom-up solution. :(

The problem is that there isn't enough money flowing, no one can get loans. Giving money to the average Joe isn't going to help anyone get a loan. The "people putting their money into risky investments" are banks. We need the banks to survive, we can't "punish" them for their misdeeds. We need to bail out the system, then put tighter regulation on risk.

We're already at the point where loans are going to be harder to get. If the government backs/helps with the bad loans once again making them profitable, banks once again become profitable and the banks will start lending to one another again. I realize that there exist many problems with a solution like this, and a lot of people will probably resent the idea that their neighbor's mortgage is not partially paid by the government (I'd like to see the government also gain some equity in the house if a situation like this arose). Of course I'm not suer I want the government owning a percentage of a bunch of houses all over the U.S. either.

Now let's be clear that I'm not a fan of the trickle-down theory (i.e. voodoo economics; it's complete BS), but this is a case where we have to save the system or else everyone loses. If this spirals into another Great Depression, who did the worst then? Not the bankers who's banks fail, but the middle class who no longer could get a job and feed their family.

Trust me, I can see the worst coming, the no-loans, bigger contraction, higher unemployment spiral that we're standing on the brink of. Being an engineer I tend to look for the root cause (bad loans) and find a way to fix that (government help on the bad loans) and once the foundation is fixed the rest should flow up.

Why has trickle-up economics never been tried? More money in the hands of those who are barely scraping by would lead to more consumption (and maybe a little bit of savings on the low end) which would also yield growth in the economy rather than giving more money to those who have everything and will invest. I can see the benefits of investing but without consumers no economy can survive.

Of course it's very simplistic and idealistic and would therefore never work but sometimes I just like trying to think outside the box.

[Macaddicttt]

Why has trickle-up economics never been tried? More money in the hands of those who are barely scraping by would lead to more consumption (and maybe a little bit of savings on the low end) which would also yield growth in the economy rather than giving more money to those who have everything and will invest. I can see the benefits of investing but without consumers no economy can survive.

Of course it's very simplistic and idealistic and would therefore never work but sometimes I just like trying to think outside the box.

No, I definitely think that trickle-up economics is sound in principle, and probably works. It's the principle behind Obama's tax plan (95% of people getting tax cuts, many not paying any income taxes), and one of the reasons I really like it. After 9/11, Bush tried to get people to spend more money, but the ones who got the tax breaks were the rich who had no need to spend the money. Someone scraping by would spend it in a heart beat and wouldn't rack up ridiculous credit card debt.

The problem is that this thinking doesn't apply to the current, immediate crisis. It's the system that's in trouble. The system could fail. It's not that we're just going through a rough patch. Trickle-up could solve the recession we've been in for a while (I know it's not technically a recession, but unemployment and the wealth gap is growing in such a way that for a majority of people, it is a recession), but not the current immediate crisis.

You're absolutely right that we need to go for the cause of the problem, but fixing the cause before keeping the entire system from going belly-up won't do anything. It'd be a case of too little, too late. We need a comprehensive solution that fixes the causes of the crisis, and rescues the current system before it is destroyed in a way that it was in the Great Depression, which could only be saved by the huge economic boost that was the Second World War.

[rasmasyean]

We're already at the point where loans are going to be harder to get. If the government backs/helps with the bad loans once again making them profitable, banks once again become profitable and the banks will start lending to one another again. I realize that there exist many problems with a solution like this, and a lot of people will probably resent the idea that their neighbor's mortgage is not partially paid by the government (I'd like to see the government also gain some equity in the house if a situation like this arose). Of course I'm not suer I want the government owning a percentage of a bunch of houses all over the U.S. either.

The government shouldn’t have to help people keep their existing homes or anything like that. That’s a trivial matter that can easily be solved by “downgrading” their residences that they shouldn’t have been able to afford in the first place. That’s just “Spoiled American” mentality if people want to be bailed out of their greed. There are people who live in 6-person 20x20 rooms out in the world. There’s always going to be someone who has enough money to buy your home…perhaps at an “unavoidable discount”. And there will always be some other poor sap who will sell you their smaller home as the same unavoidable discount. If not, then go rent! If not, hope you have nice family! :P

Trust me, I can see the worst coming, the no-loans, bigger contraction, higher unemployment spiral that we're standing on the brink of. Being an engineer I tend to look for the root cause (bad loans) and find a way to fix that (government help on the bad loans) and once the foundation is fixed the rest should flow up.

Why has trickle-up economics never been tried? More money in the hands of those who are barely scraping by would lead to more consumption (and maybe a little bit of savings on the low end) which would also yield growth in the economy rather than giving more money to those who have everything and will invest. I can see the benefits of investing but without consumers no economy can survive.

Of course it's very simplistic and idealistic and would therefore never work but sometimes I just like trying to think outside the box.

Already banks are restructuring and engulfing each other. The survivors aren’t going to buy up all those spoils if they are expecting to fail themselves soon. With the new entities will come new laws to minimize these types of risks for the future. And the survivors, whether domestic or international will pick up the business and make money flow. Maybe the government might help some “worthy” banks along to speed up the recovery, but to save all of them is ridiculous and that money is better spent elsewhere imho. There are already so many investment banks/retail banks all over the world and don’t be surprised if more of them start appearing on the scene as they wait for an opportunity to swallow a casualty.

[Macaddicttt]

The government shouldn’t have to help people keep their existing homes or anything like that. That’s a trivial matter that can easily be solved by “downgrading” their residences that they shouldn’t have been able to afford in the first place. That’s just “Spoiled American” mentality if people want to be bailed out of their greed. There are people who live in 6-person 20x20 rooms out in the world. There’s always going to be someone who has enough money to buy your home…perhaps at an “unavoidable discount”. And there will always be some other poor sap who will sell you their smaller home as the same unavoidable discount. If not, then go rent! If not, hope you have nice family! :P

You obviously don't understand the crisis. People were duped into getting mortgages beyond their means. Then the housing bubble burst, saddling people with debt. It's not a simple matter of "downgrading" and it isn't a problem easily solved. Here's why:

I buy a house for $100,000 on a subprime loan. The housing bubble bursts. My house is now worth $80,000. If I manage to sell my house (which is difficult in the crisis we're in) for $80,000, I've taken a loss of $20,000 and still can't completely pay off my mortgage. So now how am I supposed to afford housing for me and my family, especially when the banks start failing and there isn't enough liquidity in the market to give loans to strong businesses let alone families with $20,000 in debt?

[.Andy]

You obviously don't understand the crisis. People were duped into getting mortgages beyond their means. Then the housing bubble burst, saddling people with debt. It's not a simple matter of "downgrading" and it isn't a problem easily solved. Here's why:

I buy a house for $100,000 on a subprime loan. The housing bubble bursts. My house is now worth $80,000. If I manage to sell my house (which is difficult in the crisis we're in) for $80,000, I've taken a loss of $20,000 and still can't completely pay off my mortgage. So now how am I supposed to afford housing for me and my family, especially when the banks start failing and there isn't enough liquidity in the market to give loans to strong businesses let alone families with $20,000 in debt?
That's a nice, calm, and simple explanation Macadicttt. Kudos :).

[rasmasyean]

You obviously don't understand the crisis. People were duped into getting mortgages beyond their means. Then the housing bubble burst, saddling people with debt. It's not a simple matter of "downgrading" and it isn't a problem easily solved. Here's why:

I buy a house for $100,000 on a subprime loan. The housing bubble bursts. My house is now worth $80,000. If I manage to sell my house (which is difficult in the crisis we're in) for $80,000, I've taken a loss of $20,000 and still can't completely pay off my mortgage. So now how am I supposed to afford housing for me and my family, especially when the banks start failing and there isn't enough liquidity in the market to give loans to strong businesses let alone families with $20,000 in debt?

You obviously don't understand personal finance.

This is what you do. You sell your house at $80,000 so now you only have $20,000 in debt that is easier to pay off. If you want another house, then you buy one at $50,000...which makes your debt only $70,000...which is easier to pay monthly. If you can't get work to pay off either $20,000 (+ rent) or $70,000, I guess you'll have to incur penalties and perhaps file bankruptcy at last resort. Either way, that doesn't change the fact that you lost $20,000, I know. It happens. Tough.

As for "blaming" the lenders for the borrowers demise, we can argue about this forever, but lets just say that not everyone agrees with what is considered begin "suckered" vs. being "stupid". Some housing owners should not have bought that $100,000 house. If they lost on the "gamble", why should I have to bail them out?

[.Andy]

This is what you do. You sell your house at $80,000 so now you only have $20,000 in debt that is easier to pay off. If you want another house, then you buy one at $50,000...which makes your debt only $70,000...which is easier to pay monthly.
Where does one get this $50 000 loan?

[rasmasyean]

Where does one get this $50 000 loan?

Are you assuming a total market collapse? There will be "less" credit available. Not "NO" credit. I mean, in a total collapse of the United States, the last thing I'm worried about is my house. :D

[.Andy]

Are you assuming a total market collapse? There will be "less" credit available. Not "NO" credit. I mean, in a total collapse of the United States, that last think I'm worried about is my house. :D
I'll ask again as you understand personal finance. In a market with "less credit available" where does one go to get a home loan for $50 000 with no deposit, no fixed assets, and $20 000 debt to their name?

[rasmasyean]

Also, it brings to mind an analogy I thought of to Margin Trading, where an investor can use their assets as collateral to borrow money to buy stocks. If the margin investor overdoes this in speculation that his stocks will keep rising, and it busts, that investor can potentially "lose the shirt off his back" as they so say.

Bail him out? Yeah right! Burn baby burn!!! :p

EDIT: As a matter of fact, this is analogous to what happened to Lehman I think in the institutional sense.

[rasmasyean]

I'll ask again as you understand personal finance. In a market with "less credit available" where does one go to get a home loan for $50 000 with no deposit, no fixed assets, and $20 000 debt to their name?

OK, so at one point with your then income and nothing, you are worth of $100,000 credit.

Now, with your current income and -$20,000, you are worth of say $70,000 total, which means you can borrow $50,000.

$100,000 back then...$70,000 now.

[Desertrat]

This StratFor article is a pretty good read. It give background, reasons for why the different votes in Congress, and illustrates the opinions that are held regarding consequences of policies.

http://www.stratfor.com/weekly/20080930_political_nature_economic_crisis

'Rat

[rasmasyean]

For those interested, here's a quick summary of Lehman's reason for collapse.

http://nymag.com/daily/intel/2008/09/what_happened_at_lehman_in_30.html

[P-Worm]

OK, so at one point with your then income and nothing, you are worth of $100,000 credit.

Now, with your current income and -$20,000, you are worth of say $70,000 total, which means you can borrow $50,000.

$100,000 back then...$70,000 now.

I'm not following this. If you are 20,000 in debt, how are you worth 70,000?

P-Worm

[rasmasyean]

I'm not following this. If you are 20,000 in debt, how are you worth 70,000?

P-Worm

Oh sorry. I meant you are worth $70,000 credit....instead of $100,000 credit before.

[Macaddicttt]

Oh sorry. I meant you are worth $70,000 credit....instead of $100,000 credit before.

Ah, but there's the catch. You were never worth the $100,000 credit before. You bought beyond your means because the people at the banks told you that you could afford it. In reality, you couldn't.

And again, where are you going to get this money? No one's lending to anyone. Companies are afraid they won't be able to continue running because they can't borrow money to pay their paychecks. How is someone in debt going to get a loan if a sound company cannot?

And if a sound company cannot get loans, then they can't pay their people, so then jobs are lost. So then you are no longer worth even this fictitious $70,000 because you no longer have a job.

You have to understand the entire system, and then you'll realize that we need to save the system as it is right now. Then we can start regulating and preventing this sort of thing from happening in the future. This whole bank failure thing is just the first domino that will fall unless we prop it back up.

[rasmasyean]

Ah, but there's the catch. You were never worth the $100,000 credit before. You bought beyond your means because the people at the banks told you that you could afford it. In reality, you couldn't.

And again, where are you going to get this money? No one's lending to anyone. Companies are afraid they won't be able to continue running because they can't borrow money to pay their paychecks. How is someone in debt going to get a loan if a sound company cannot?

And if a sound company cannot get loans, then they can't pay their people, so then jobs are lost. So then you are no longer worth even this fictitious $70,000 because you no longer have a job.

You have to understand the entire system, and then you'll realize that we need to save the system as it is right now. Then we can start regulating and preventing this sort of thing from happening in the future. This whole bank failure thing is just the first domino that will fall unless we prop it back up.

And when no one gets jobs and we all go to the barter system, and will lead to civil war! :eek: Speak of doomsday scenario!

If you really think it's that bad, you should be buying out all the canned food and guns. I don't know what will happen, but I don't have THAT much of a negative feeling about this despite all the media hype around it. lol

I guess only time will tell...

[atszyman]

And when no one gets jobs and we all go to the barter system, and will lead to civil war! :eek: Speak of doomsday scenario!

If you really think it's that bad, you should be buying out all the canned food and guns. I don't know what will happen, but I don't have THAT much of a negative feeling about this despite all the media hype around it. lol

I guess only time will tell...

I doubt we'd get to the barter system but it's a real risk that with a massive credit crunch we'll end up with higher unemployment which will further slow the economy (or speed up the downward trend). I'm not necessarily worried about myself, our house didn't lose too much value, we've got a fair bit of equity, we have no credit card debt to speak of and enough money to float for a long period of unemployment (provided no medical issues eat those funds in a matter of weeks, another good reason to have a better healthcare system).

As for the loans, do you really think that the people who thought that maxing their credit cards and making minimum payments was a sound strategy to debate the banker (who's job it is to loan money at a profit) when the banker says you can afford $X?

There are many who just believe the banker and the banker was counting on the fact that the house would be worth more in a few years so that even if the bank had to foreclose the assets obtained would be worth more. Who is the more idiotic party in that scenario? The person who is trusting someone who deals with money and the risks for a living? or the financial expert who extended a loan to the applicant completely unqualified based on the assumption that the housing boom would continue forever while most people saw it as a bubble years ago? Are there people who took advantage of the system? Sure. Are there people who were taken advantage of? Sure and I don't have much of a problem with helping the latter.

We need to approach both ends of the system so that we don't loose consumers on the low end and lending industry on the high end or the spiral could get worse as the low end consumer lose their houses and ability to buy, and the high end stops lending leading to less consumption, etc.

One thing I think we can all agree should come from this is a required high school course that shows how to do basic finance calculations and how to create and live within a budget and prioritize expenditures so that everyone has a basic knowledge of how to determine what they can afford rather than relying on the bank to determine how much you can borrow.

Very few of us like the idea of being forced to pay for other people's bad decisions whether it's those at the top who traded debt based on a housing bubble that many were warning about for years, or it's those on the bottom who bought more house than they can afford due to their own optimism on housing prices or a banker who convinced them they could afford it. However the likely decline in credit and downward spiral that could easily occur with no intervention scares the hell out of me, and we actually have money in the bank, positive equity in our house, and well paying, currently stable jobs.

[rasmasyean]

I doubt we'd get to the barter system but it's a real risk that with a massive credit crunch we'll end up with higher unemployment which will further slow the economy (or speed up the downward trend). I'm not necessarily worried about myself, our house didn't lose too much value, we've got a fair bit of equity, we have no credit card debt to speak of and enough money to float for a long period of unemployment (provided no medical issues eat those funds in a matter of weeks, another good reason to have a better healthcare system).

As for the loans, do you really think that the people who thought that maxing their credit cards and making minimum payments was a sound strategy to debate the banker (who's job it is to loan money at a profit) when the banker says you can afford $X?

There are many who just believe the banker and the banker was counting on the fact that the house would be worth more in a few years so that even if the bank had to foreclose the assets obtained would be worth more. Who is the more idiotic party in that scenario? The person who is trusting someone who deals with money and the risks for a living? or the financial expert who extended a loan to the applicant completely unqualified based on the assumption that the housing boom would continue forever while most people saw it as a bubble years ago? Are there people who took advantage of the system? Sure. Are there people who were taken advantage of? Sure and I don't have much of a problem with helping the latter.

We need to approach both ends of the system so that we don't loose consumers on the low end and lending industry on the high end or the spiral could get worse as the low end consumer lose their houses and ability to buy, and the high end stops lending leading to less consumption, etc.

One thing I think we can all agree should come from this is a required high school course that shows how to do basic finance calculations and how to create and live within a budget and prioritize expenditures so that everyone has a basic knowledge of how to determine what they can afford rather than relying on the bank to determine how much you can borrow.

Very few of us like the idea of being forced to pay for other people's bad decisions whether it's those at the top who traded debt based on a housing bubble that many were warning about for years, or it's those on the bottom who bought more house than they can afford due to their own optimism on housing prices or a banker who convinced them they could afford it. However the likely decline in credit and downward spiral that could easily occur with no intervention scares the hell out of me, and we actually have money in the bank, positive equity in our house, and well paying, currently stable jobs.

Dude, who cares about those people’s houses…You make it sound like everyone and their mother has been foreclosed and are employed by banks. If they can’t do simple math or just are too speculative in nature, you can’t help them anyway because they will just apply their faults elsewhere. You don’t need a degree to understand this stuff if you just spend the time to do research considering you’re like spending all your savings!

The troubles are mainly localized for the financials. Maybe it will spread like the all fear scenario. Maybe not. One thing for sure is that banks will get some money back when they foreclose all those places so it’s not like the money completely disappeared for everyone. Foreclosing can potentially create a decent cash flow. If no one will buy MBS, someone will buy the houses. As a matter of fact I’m sure there are a lot of ppl with money like yourself who are waiting to bite.

Other firms have lots of cash. Microsoft just did a 40 billion dollar buyback of stock. I think Apple had like 20 billion and may be doing it, and others like Cisco and stuff as well but I don’t know what happened with them.

Hey, maybe it’s better to let US banks fold a bit and be engulfed by even foreign banks and let someone else take more of the financial sector. Like Japan, Dubia, Asia, whatever. And workers can be re-employed in other sectors that have more real value. Not saying finance is useless, we need that too, but screw it, banks are hardly “innovators” and don’t do much except support creativity and advancement elsewhere. Even Bill Gates said something like this in an interview. LOL! The US is better off using their schools to train people for jobs in Microsofts, Intels, internet, biotech, nanotech, etc. and they will bring the country back into competitiveness with the rest of the world. We have the structure in place for people to take risks to bring the future so why not use it more. Finance is just some dead but necessary weight.

Take if from someone who has been there. Too often have people just griped about this and that and waited to go home with long faces. You never see someone say “YES!!! It’s time to enhance the flow of the economy, girls and boys! Let’s make a difference!!!”. Rofl!