The crisis has NOTHING to do with the stock market. The market volatility is a symptom.

[scheming daemons]

The credit freeze is the crisis.


Some "tainted meat" got into the system (subprime loans) and bundled in with the "good meat".

1. Now, banks are unwilling to buy "meat" from other banks because they have no way of knowing if the meat is tainted with bad meat. Doesn't matter if 90% of the meat is good, the 10% that is bad will make the consumer sick.

2. Banks are also not able to buy any new "meat" from the people (give out loans to businesses and individuals) because they can't secure the funds needed to buy the meat because of #1.

So.... now there is no meat for ANYONE. Restaurants (small businesses) can't find anybody willing to sell them meat unless they pay an exhorbitant price for it (high-interest loans). Soon... the larger businesses won't be able to find anybody willing to sell them meat either.


The bailout plan is the government saying: "We'll buy up all the tainted meat, to clear up the system and allow new - untainted - meat to begin to be sold. Since we're the government, we can take the time to separate the bad meat from the good meat and then re-sale the good meat for a profit once the meat-market regains confidence that the meat is safe. Then we'll throw away the bad meat. It will cost us $700B to buy all the tainted meat, but we'll get most of that back after we separate the good meat from the bad and sell the good meat on an improving meat market. And even if we can't, at least we got the bad meat out of the system so the meat-market can flourish."

[Common Sense Party]

1. Makes me want to go vegetarian.

The market collapse will be a painful side effect of doing nothing. The whole global system is going to crater if something smart doesn't get worked out very soon.

[wtmusic]

2. You must have a freezer full of tainted filet you want me to buy.

Me, I've been stocking up on hamburger. I'm good for now, thanks.

[Incitatus]

3. I'm hungry

[BuyingThyme]

4. I like hot dogs.

Can you do this with hot dogs?

Or what if we just put lots of ketchup on the bad meat instead of throwing it away?

[kirby]

5. One thing that scares me...

In the 106 page bill is a provision giving the SEC authority to suspend 'Mark to Market' accounting rules. Mark to Market requires business to value assets on their books at the free-market value. Suspending it would allow financial games such that businesses could value it at whatever price they 'hope' to sell it at one day. A lot of people are bitching 'get rid of mark to market'. It believe it was instituted in the past year by FASB and while it may have provoked part of this crisis, it is only because I believe it exposed the fudged/inflated numbers on the books.

[Incitatus]

9. How is a free market value determined when there is no market for them?

No one except the government can afford to take them off their books.


I thought the original idea was around 60 or 70 cents on the dollar, as in 60%/70% of what they originally paid.

[kirby]

19. 60 or 70 cents would be a taxpayer rip off...

Think about it. Many of the assets are mortgage backed securities. Housing is WAY WAY overpriced due to the housing bubble. If prices of recently purchased bubble homes need to drop another 60-80% that is not so great a deal. And due to the underlying economy, increasing foreclosures, means alot of those mortgages will go into default.

[Incitatus]

21. They should only get enough to stay afloat.

If that means 20 or 30 cents on the dollar, then so be it. I didn't get to read the whole bill, but there was some talk of warrants. If the government isn't able to get their money back off the purchased assets, then they should be able to take out the difference in equity.

[kirby]

26. They have been talking about a reverse auction...

To me that sounds like will be be easy for business to collude with one another and refuse to sell their stuff less the a certain amount. A reverse auction is where the Treasury buys from the seller who offers to sell for the lowest price.

[jakefrep]

14. "Mark to Market" doesn't work too well if nobody can figure out what "market" is

The problem may not be so much that the securities in question are worthless, but that noone can figure out what they are worth.

[kirby]

18. A company is valued by its assets...

Magically redefining what the meaning of 'value' is only hides the problems. If you are holding hard to value assets that means you have put yourself in a very risky situation. When there is high risk, you need to retain more capital to backup your risk. Ignoring this fact is partly got us where we are today. Companies are highly leveraged on these hard to value assets.

[snappyturtle]

6. Who tainted the meat? Great analogy,btw. nt

[johnaries]

7. EXACTLY! It's about businesses being able to do business.

And let me make this clear to everyone - by "credit freeze" we're not talking about your credit cards or mortgages. We are talking about the money that most businesses need on almost a daily basis to do business.

Google "broke the buck" for more info. This is not about the stock market, this is about OUR jobs.

[SoCalDem]

8. Um... about that "bad meat" we all bought...

will that be what's sent to the school lunch program:eyes:

It does not just "disappear"..and it cost us dearly when we "bought" it the first time..the second tine, the third time, etc.. Every time that bad meat got re-packaged, there was big money being made along the way.. Let's get THAT money back, and send the bad meat people who kept selling it...to jail :)

[redqueen]

10. Should they be buying the bad meat at above market prices?

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4124428

I'm disgusted with everyone in DC who has watched this crisis develop and apparently done NO research into how to address it!

:puke:

[magellan]

11. Please explain how one goes about selling tainted meat

...for the original value.

[scheming daemons]

28. The tainted meat...which is 10%... WONT be at the original value...

That's the part the government has to "eat" (pardon the pun).


The 90% that is good, gets resold on the market and the govt recoups some of the $700B.

[magellan]

32. How do they know 90% is good? n/t

[earth mom]

12. This bailout is nothing more than a side of beef infected with Mad Cow disease.

:puke:

[Subdivisions]

13. They're made of meat...

http://www.youtube.com/watch?v=gaFZTAOb7IE

[GetTheRightVote]

15. Yep and we end up paying for the bad meat and are excepted to feed ourselves on it instead of them.

:grr:

[rucky]

16. They knew some of the meat was tainted when they bought in.

But bought anyways. Why can't they sort their own meat that's poisoning their tranches? Wouldn't foreclosure help from the government accomplish the same goal and lower everyone's risk in the process?

[WhaTHellsgoingonhere]

17. Karl Dessinger, MarketTicker, credit WORTHY people/banks...

...can still get credit.

So, what side of credit worthy thingy are you on?

[Junkdrawer]

20. Sounds like a disclosure problem. Sausages are like that...

What's the expression? "MBS are like sausages, it is better not to see them being made."

[Done]

22. Too many in washington...

have been beating the meat.

[JHB]

23. What happens to those who marked the bad meat "Grade A"?

It twern't the USDA that graded these, and it was over-rating that helped fuel their (ab)use.

What gets taken out of their hide?

[scheming daemons]

29. Good point. That was what the REST of the bailout bill was

[librechik]

24. promises, promises--oops, we MEANT to get that tainted meat, but

unfortunately we were hamstrung by the provisions of the bill that allowed us no means to stop the meat from getting buyndled , even after we knew it was bad. All we could do is tell the greedy butcher that there was bad meat in that batch, and watch him sell it off unmarked anyway.

Why not wait for a bill with a stick as well as a carrot?

[OPERATIONMINDCRIME]

25. Very Well Put.

:thumbsup:

[JVS]

27. Fuck that shit. I don't want my tax money turning a loss. Only bailout if it's profitable to us.

[Douglas Carpenter]

30. I think that pretty well sums it up. thank you

[bvar22]

31. Nice, BUT....

...The "tainted meat" didn't just magically appear in the system and accidentally "get bundled in with the good meat".

Alarms have been ringing for years. Many experts have been screaming that the meat packing system had major design flaws, and that it was only a matter of time until "tainted meat" contaminated the whole system.

Some demanded that the system be fixed before a crisis happened, but they were laughed at and called "fringe" or "Cassandras".

Some were so frightened by the lack of protections and inevitability of contamination that they took personal precautions and became economic vegetarians.

Many looked at the system, and saw a way to make $Millions by knowingly bundling their worthless "tainted meat" into the system, and later crying for a "bailout".

There are two things about the current "crisis" that are undeniable:

1)Unless the systemic problems are fixed, a bailout is only a temporary salve applied to a gangrenous limb.
"Bail it now and we'll fix it later" is a scam. It is as credible as believing a long term junkie who promises, "I will quit tomorrow, just give me my fix today."
(Remember the Democrats who said that they would fix the Patriot Act later, or the Democrats who said they voted FOR the IWR because it contained protections.)

2)"Who could have imagined...." is NOT a valid excuse.
The current crisis was not only inevitable, it was a predictable certainty.
The Writing has been on the Wall for YEARS for those who took the time to read it.

The independent watchdogs have been screaming for years.
"HEY EVERYBODY! The BIG Meat Packers are using tainted meat!
DON"T EAT THE FUCKING MEAT!!!!!