I'm sorry. I need someone to explain todays events to me, please.

[OmahaBlueDog]

1. If I understand this correctly, the WH, Treasury, Senate Republicans, and all Dems thought we had a deal. Then there was a dustup at the WH, and the GOP House members walked away. So, at this point, the President and House Republicans are, ostensibly, on the opposite sides of an issue. Is this a remotely correct understanding?

2. I distrust all Republican politicians to at least some extent on general principles. However, my understanding is that the House GOP members don't want to buy the stinky mortgage backed securities. Their proposal is to insure the stinky paper to it them more attractive to private investors to minimize the cost to the taxpayer. On its face, this (and I'm deeply suspicious here), this doesn't sound like the worst idea I've heard. I like it better than buying the stinky paper and putting it in the Treasury for later sale. What am I missing here?

3. OK. My understanding is that if the government fails to act, the stock market will tank, credit will dry up, and this will not help businesses, home buyers, and home sellers; but others say only those atop the financial pyramid will really suffer and main street won't feel much impact. Which is it?

4. Debate. Yes? No? Maybe? Not discussing the original topic (which was supposed to be Foreign Policy)? Discussing the original topic?

[WheelWalker]

1. It's a TRAP!

[OmahaBlueDog]

6. Can you elaborate? How is it a trap?

I'm not being snarky. I'm really trying to sort this out.

[NeedleCast]

18. It's a trap because no one's taste buds can deflect flavor of this magnitude

[Indiana_Dem]

2. I'm not really understanding everything either--but

I do think I understand that if we don't have some type of bailout that everything will tank big time and all of the little investors with their retirements will go under....along with no loans to businesses...no more credit for most.....dollar plunges...economic armagedon....like an actual depression.

It is my impression that this is what McCain, the GOP, and some of the Dems want--no bailout under any circumstances.

I may be wrong but this is what I'm getting from what I'm reading.

I'm reading that our chances are better at gambling with some sort of bailout--things may turn out the same....but if we don't do anything it's a sure thing.

[TheWraith]

3. You're mostly correct in your understanding.

There's some indication that McCain may have conspired with conservative House Repubs to tank the deal.

As to the debate, I suspect McCain will be shamed into showing up.

[Newshues]

4. 1 yes, 2 yes but pelosi demanding 100 GOP

house members vote for the bail-out so we have political cover is what gave them the power to throw a monkey wrench in the works ( can we replace her in January? ) The part your missing is there is no upside for the tax payer while with the plan that was on the table there was an outside chance of actually turning a buck on the deal.

3) you have the first two backwards. credit dries up and then the market tanks. nearly simultaneously so the distinction isn't that great but that doesn't change that the underlying reason is the drying up of credit. Everyone suffers with no deal, wall street and maine street. The folks on wall street are just better able to endure the consequences of their own actions while the folks on main street far less so

4) beats the hell out of me but if there is one Obama plans to turn it into a debate on the economy - How can we be strong abroad if we are weak at home?

Yes, now is a good time to be concerned.

[OmahaBlueDog]

8. So obviously, we have members of our own party who won't back this either

.. otherwise, with no fillibuster option in the House, we'd just ram it thru. How short on votes are we?

On the other points, thank you for the clarification.

[Indiana_Dem]

5. Then again, I'm so mistrustful of the Bush administration.

I mean its like they have lied about almost everything. So what makes me want to believe this administration after they've lied to us so many times? I mean, I'm not hurting right now in this crisis. I am debt free and have money saved which is not in stock markets or anything. I am a nurse, so my job is fairly secure even if I have to barter my skills out privately for tangible goods. I may have to make some sacrifices but I could be better than most. Personally, why should I care? I've been prepping for this for 5 years. I learned gardening, preserving/storing foods, secured water needs, have barter items.

[2Design]

7. it was a trap to start with since the republicans caused this mess

they are posturing to make it look like democrats and our dummies in congress are trying to enable this lame duck by giving wall street money while tacking on a lot of pork when they have no idea if any of this will work - this plan has been in place for several months and they just walked right into this trap as they have the iraq vote, patriot act, etc.

[OmahaBlueDog]

9. Just for the sake of discussion..

suppose we find the house votes, and get the deal we thought we had yesterday passed. Then, suppose, as many have suggested, the markets stabilize as a result. Don't McSame and the House guys who walked out look like obstructionist schmucks?

[spag68]

10. obstructionist schmucks

That would be a big step up from what I personally think of them. They are Thieves, war-mongers, torturers, cowards,and many more. Another thread suggests that we let them sweat for a while and see what shakes out, sounds good to me, but what do I know?

[OmahaBlueDog]

11. I agree that they are thieves, war-mongers, torturers, cowards

However, I'm trying to focus on this issue.

[Hawkowl]

12. Not necessarily

Regarding 3)

Some economists are arguing that the bailout is not only not needed but could be incredibly inflationary (think 1930's Germany and buying a loaf of bread with a wheelbarrow full of cash). Some are arguing that since all 5 of the major investment banks (Goldman Sachs, JP Morgan (both permitted to morph into commercial banks), Bear Stearns, Lehman Brothers (both bankrupt and assests being disposed of), and Merrill Lynch (bought by Bank of America) are now solvent or their assets disposed of, that a bailout makes no sense. See investment banks provide capital to banks and corporations for mergers, acquisitions as well as traditional investments for plants and equipment. Perhaps most importantly they "make markets" for securities of all types. But it appears they don't need a bailout now.

As for regular banks, we already have a program, the Federal Reserve and FDIC, to prevent people from losing their money when banks become insolvent. Witness what just happened to WAMU. It didn't fold, it was forcibly sold to Morgan-Chase. Everybody's deposits are still there.

It is really unclear why $700 billion was requested. Nobody has explained what it will be used for. It looks very fishy indeed. Some economists are suggesting their is no liquidity crisis and credit tightening appears to be a manipulation by some financial institutions to extort money from the govt? What is certain is that a lot of institutions are going to lose a lot of money due to the indecipherable mortgage backed securities afloat. These securities are based on future values of all mortgage streams and are apparently valued at many TRILLIONS of dollars. More dollars than exist in the entire world. More dollars than the entire worlds GDP for many years. This is what truly freaks people out. These assets must be re-valued but NOBODY knows what they are worth, so banks are suspicious of each others balance sheets and are reluctant to make loans.

So throwing $700 billion at the problem without a plan is probably useless without a plan to write down the mortgage derivatives. A lot of formerly wealthy investors are going to have to eat these losses.

[OmahaBlueDog]

13. OK, so again, it seems like (as much as I hate saying this) the GOP House guys may be 1/2 right

1/2 right in that they are opposing unnecessary intervention (which is what I read from your take).

OK.. why is their insurance plan a bad idea?

[Hawkowl]

14. Maybe

Maybe the insurance plan is bad because they aren't proposing to insure mortgages but instead, mortgage backed securities. The important distinction being we can calculate how much outstanding mortgages there are, but mortgage backed securities appear to be an oxy-moron and the market for these debt instruments is between 50-60 TRILLION DOLLARS. How in the hell can we insure that?

I think an intervention is necessary but not a $700 billion give away. Use this an opportunity for strict oversight, foreclosure relief, usury laws on all types of loans and credit cards, and an equity stake for the public. We might even tax security transactions to fund this debacle.

[OmahaBlueDog]

15. Tax security transactions

Someone yesterday suggested that a 0.25% per Wall Street transaction generates an estimated $140B. If true, a 1.25% tax ought to about cover it.

[radfringe]

16. have no Fear UNDERDOG mccain is here...

mccain went into the meeting and pissed on the plan

[deutsey]

17. Well put questions. And you're definitely not alone in your confusion.