Thoughts on the 700 billion dollar bailout?

All I know is that with blood in the streets, this is the time to make money. Already bought Merill Lynch at .49, went up to 1.80 in a day. There is so much money to be made, its ridiculous. Many large cap companies will not go out of business, they will shoot back up or be cannibalized by larger companies that will buy your stock at a premium or cut you some of theirs. If the large cap companies go under, then you have a lot more to worry about then your portfolio, but in today's world, that is highly unlikely.

 

But i heard on the radio that it wasn't going to happen...

 

Wrong. About two minutes ago, the house of representatives passed it by a 3 to 1 margin. Now it's going to happen.

 

well i guess inflation is always better than another Great Depression

 

Well when you have an economic system bound destruction, I can't see how inflation is better than depression.

 

I dont know,I'm going with anybody one this one.

 

isn't economic system bound for destruction like the same as a depression? i just see it better because isn't a depression when almost everyone is poor or something?

 

In the end, to fight the situation, people need to start thinking smartly. We have to learn to save more and stop being encouraged to use credit because it's just money in the end we simply don't have and neither do the banks really. The interest on credit is ridiculous. So, if you have to take loans, make sure they are for only the most expensive of things and always try to have a huge down payment. Another way around interest is to pay more than you owe each month so that the banks don't get extra money out of you by you paying just what you directly seem to owe.

Anything else though, Americans really need to learn to not use credit cards at all beyond the house and car if that is a must. We have to try to save up what we can and stop going for extra luxury things we don't need if it can be helped, even though we really want them right now. One way I've motivated myself to not use credit cards is to think on what I want and know that by the time I can afford it, the item will be cheaper or something better will have come around that is more techie and useful for the same price I saved up.

The bail out plan in its way sucks, but at the same time, we are so dependent on banks etc, that we have to do it. If we want to change that, we have to be willing to alter our lifestyles in the future to back smaller businesses, pay for what we need to and definitely stop using credit as much as we can. Also, we simply need to read in between the lines and if we do take out a loan for anything, always get a -fixed rate- on interest so that it can never go up on you. Many people who took out mortgages on their homes etc did not know to do this and were talked into corrupt loans by Freddie Mac and Fannie Mae, as well as some banks. Though at first they offer a low interest rate, it later climbs up to ridiculous proportions which is what is mainly the cause of this, because people couldn't deal with the rising interests that took them by surprise. Fixed rates seem higher at first but at least they are stable and you know if you get a loan straight out what you could pay per month and the banks are obligated to keep it the same for the 20 to 30 years you pay.

 

I am saying that I'm against it. It annoys me. We don't need more money taken away from us.​

 

I read on the BBC that some economists think that this bailout could cause hyperinflation in the US economy followed by the complete collapse of the dollar. It is also costing around $3000 per working American (or was that per American >.> It might actually have been four or five thousand).

 

I've heard both sides, noted, the bailout did fail in the Senate.

One is from my mom, who is a blue blooded democrat. She says, and I partly agree, that if this doesn't pass it will cause a financial collapse in the government. This is the thing: Credit as we know it is frozen at this moment. No houses on the market, even with a good amount of money, the top five percent which my aunt is in, when she tried to buy a house last month, are going to be sold, the banks are tightening their noose every day.

The bailout might or might not help stop this credit crunch, but this was due at least partly to the fact that banks have absolutely also refused to give out credit due to their worries about the delinquency rate. Or how many people will pay them back. It's no longer the houses, it's cars, credit cards, student loans, businesses and god knows what else.

We are in a standstill for the economy credit, and that disturbs and worries me more than most of everything else, even than the dollar.

Think about it this way:

In the U.S., to go to college, you need a loan less your parents can pay out of pocket and financial aid, to get a car, a loan to help pay for it. To buy more expensive stuff, a credit card, which is a loan on plastic, even books that are four dollars are bought on credit cards sometimes, I work at a bookstore and see it done.

Now imagine that all gone, even with the bailout, the banks refuse to give out loans for anything, for whatever reason, or crunch it down to the point where very few people can borrow.

Where is the economy there now?

Even with the bailout, it's not a miracle cure, it's the fed saying: "Okay, you screwed up, here's money to help you, do what you want with it." It's not: "Okay, you screwed up, here's money to help you, and you have to make it specifically made in a budget for every penny you spend on either loans to help people, pull yourselves out of the fire, and use the rest on help you need, we need receipts for every transaction with the money, fyi..."

What the banks do with the money is up to them, hence the reason why it was shot down in the Senate, or one of them.

The other point is this: The Fed has other options, this was done partly because of a mass panic, which is understandable, but the Fed CAN still buy all those delinquent mortgages and save the banks. Why they don't, who knows, but it costs a crap load less than the bailout. The bank CEO's suffer, but they made a gamble, they screwed up and now they're running to the Fed with their tail between their legs. If you gamble in Vegas, you can't run to the owner after losing money and ask for a 20 million dollar bailout to save yourself.

That's my opinion from a graduated economist. *bows*

 

My guess as to why the government does not buy out these mortgages is because then the government becomes automatically 'big' government and is now in control of more than most people would want. It would be considered a movement that would federalize what has always stood as privatized instead. The bail out plan basically is not a solid cure but it offers a temp solution where the government is not 'running the show' basically.

 

Agreed. Repliku as always, for some reason beyond my comprehension, has voiced my thoughts on the issue. People are afraid of federalization, it's associated with bad things. At this point we've screwed the pooch six ways to Sunday and this bill is what many consider a necessary evil. Think what you want, what's done is done. We can only hope that this teaches Americans of all levels to learn some restraint.

 

Anyone else feel sick after they found out what AIG did with the money? Those CEOs should be fired and hauled off to jail.

 

What did AIG do with the money? *has heard a ton of different stories, like Bear Sterns, but not AIG*

You don't want to know what Bear Sterns did with their company.

Federalization is not all bad, but people were put in this mass panic because like my mom, they were told: "This will cause a huge economic crash if this doesn't pass, make the bailout happen."

Which depressed my mom severely when it wasn't passed, I did explain later what I realized in my post. It's not just federalization that's the problem, it's the information that is being said through the news to support the bailout to the point where people are going to panic if it's not passed through, it's happened in the past, even in another bailout where an industry giant got a huge bailout and flourished, turned around afterward and crushed all the small companies that would've at least held strongly against it falling.

The news gives people the scare that this is the last resort, this is the only thing that will save everyone, and that's one of the biggest and frustrating points in the U.S., because federalization is good sometimes, and in situations like this, it could help out a massive way without seven hundred billion dollars just given out there in the economy to maybe cause a severe economic crash.

Oh yeah, another note, we ARE in a recession, all economists called it on February with the job losses, one of my teachers called it the day school started again. It just hasn't been officially announced due to several circumstances, one being the election.

 

Well it will temporarily stall the crash, but ultimately, it is simply speeding up the depression & collapse. That's what I think anyawy.

 

There will be no crash. If the dow going down 777 points isnt a crash, it wont crash. These companies will cannibalize the weak links and we will have an oligopoly in the financial sector. Every one sees the weak market as the end of the world. If you want to make money, this is the best market ever because us young people have nothing but time on our hands. The best info I ever received was, "when theres blood in the streets, buy like your life depends on it".

 

*hopes this isn't a stupid question* but where did all the money they lost go? it couldn't just disappear into thin air, it HAD to have gone SOMEWHERE.

 

Bank owners mostly invested it in risky loans, meaning the person didn't have good credit in a lot of cases.

Think about it this way: You want to get a house, you work part time at a store where it just pays the bills, the bank offers you a mortgage on a house that is for sale, a really low interest rate and something you can afford. You buy the house, ten years pass and suddenly your payments go up to over a thousand dollars a month. This is called a floating interest rate where the banks control what you're paying for interest. You can no longer afford the house, you get behind, boom, you're evicted.

Now picture this happening to hundreds of thousands of people all at once, the banks no longer are getting cash from one of the biggest loan groups in the industry, the money the banks had was spent, on spas, weekend homes, private schools, Mercedes, you name it...

The banks basically spent the money they had and are no longer going to get any money from the loans. Also to boot, no ones buying the loans anymore because of the financial crisis, so they're not getting any cash flow from this either.

This what killed the banks. It wasn't only housing, it was cars, student loans, credit cards, business loans...

 

The banks and mainly groups like Freddie Mac and Sally Mae gave out loans that in some cases were risky. In other cases, the banks and these loan agencies were corrupt and figuring if people are stuck in loans, if they can't pay right, the interest goes up. Also, some set up loans with non-fixed rates so that interest could shoot up ridiculously and this took people off guard so that their monthly payments they could handle suddenly became increased.

I tell -everyone- anymore that if you ever have to take out a loan, ensure it is always on a fixed rate and do not trust the banks and especially do not trust Sally Mae, Freddie Mac or any of the loan agencies. You may end up paying more at first in comparison with a low interest beginning loan, but in the end, you will pay out the arse more than likely.

The loss of jobs has also hurt us and people who were stable simply could not pay the amount when the interest rises and also they cannot find jobs that match a former job they had for even years before it closed down and went overseas or just shut down due to bankruptcy.

Many loans also were given out to people who could barely speak English and there were reports even a few years ago about loans being handed out to Spanish speakers who could not understand all of the jargon and were put into houses at first that they could afford but the interest raised on them and they of course signed papers with 'small print'. Student loans and mortgages on homes for student loans is also another thing that hurt many people. When students get out of college, they owe a lot. One of my friends has to pay per month 645 dollars and her job only earns her 1600 a month. She can't really live on her own because of it and she will owe this for years. The job market is so bad and Sally Mae won't lower the monthly rate, which by the way, you are not told of until you do get out of school.

The practices simply are corrupt and banks and these loan agencies ride on the fact that they can hand out money that doesn't really exist and then tack on huge interest whether or not people pay back the right way. They often will not work with people to lower the costs so that at least something goes their way, but people will try to pay less because they have little choice. Many go into default and so we have the mess we do.

The corps would love to blame people who are the ones getting ousted from their homes, and in some ways there is a blame that falls to anyone who can't pay a loan taken out. Unfortunately though, more of the blame falls to the banks and loan agencies who gave out loans and worded things funny, gambled on making -more- money by attaching strong interests and figuring if the loans didn't go right, they could steal the homes etc and sell them for more profit and someone yet again is caught in a deal with them.

I do think we need to be more responsible and if we do not know how to understand the jargon of these places, we need to get a lawyer or someone who does before signing anything for a loan that is going to last years. People are responsible and naivete only goes so far as an excuse. However, these corps need to be investigated and I was very happy to read that Fannie Mae and Freddie Mac now have to give up their records to be gone through so that we can learn just exactly what was going on because they have been already caught having misleading records. Europe is also going through similar problems with their banking and loan agencies and it's a big issue. The Bail Out Plan was only something to try to alleviate symptoms in the end. We need to now have people go in and tackle the symptoms and find a way to make the disease go away.