Realistically speaking, if we DON'T bail them out, what truly are the consequences SPECIFICALLY

[BigBearJohn]

Does anyone know?

[JeffR]

1. Hoping for a really detailed, smart anser to this question.

Since I'm clueless on the issue, but keen to get some understanding.

[seabeyond]

72. it is an unknown. it is the future. one can only predict...... that is the hard part

they say that there will be mass job loss. inability to get loans. businesses wont be able to get loans for like payroll. great depression. run on banks.

[lligrd]

2. Nope, It Is A Big Secret

I suspect that it means their plan to break the government went a bit awry and that the market would fall meaning those invested in it (especially those heavily invested) might actually lose on their gamble. If instead, it is a lie, then they are just finishing their attempt to break the government and we just handed them the keys.

[sandnsea]

3. No. Money.

It's been explained repeatedly and believe me, if I can understand it, anybody can.

The banks stop trusting each other. They stop honoring each others checks and other monetary transfers. Cash stops flowing. Everything collapses.

NO MONEY.

[still_one]

11. Bingo. It would lead to massive business failures, which would would lead to

accelerated unemployment

cash would be king

[avaistheone1]

93. What a bunch of crap. The only BIG unemployment is going to be on Wall Street.

Most economists say this is not going to be the Great Depression.

But carry on anyways.

[quiller4]

94. The unemployment will be on Main Street

The credit crunch is already causing unemployment and the first area hit is our shrinking manufacturing sector. In a credit crunch it is blue collar jobs that disappear often never to return.

[backscatter712]

49. That's it basically.

It's called a liquidity crisis because all of the sudden, even though you might have a decent chunk of money in the bank, it suddenly becomes illiquid. In other words, YOU CAN'T USE IT! Other people have explained why this is happening - banks no longer trust each other and extend credit to each other - one bank refuses to accept credit from another bank they're afraid is about to fail, then more banks start doing this, and before long, all the banks are refusing to extend credit to each other, making basic operations like depositing a check in one back written on another bank impossible or very difficult.

You try using your debit card to buy groceries. You know you've got plenty of money available, you're an account holder in good standing. All of the sudden, BZZZT! Declined. No groceries for you.

Other bad things happening because of illiquidity. That direct-deposited paycheck you get every two weeks? Even though your employer's solvent and you're an employee in good standing? All of the sudden, that direct deposit doesn't go through. No paycheck for you.

Businesses that require short-term credit so they can buy materials, pay workers, etc. all of the sudden find they no longer have that credit - they have to scramble to find new arrangements, and if they can't they have to shut down operations, lay off workers, maybe even close for good.

You'll end up with a chain-reaction of fuckups because people all over the place can't spend their money, or no longer have access to credit they previously did, through no fault of their own. The result on the economy as a whole will be total chaos.

[Hannah Bell]

51. People can spend their money if they have it. I don't know why you're

saying they wouldn't be able to spend money just because it's in a bank, unless the bank failed.

Liquidity crisis is lack of credit & thus contraction of the money supply.

[backscatter712]

76. You'd be amazed how much credit enters the picture when you look under the hood.

If you have an account at Citibank, then go to a Chase ATM to pull out $100, on the surface, it looks like you're not using credit - it's all your money.

No.

When you actually use the money, you're pulling out Chase's money, and as a result of financial wheeling and dealing designed to make the process transparent to the end customer, Citibank now owes Chase $100. It happens all the time - banks give loans to each other, with no collateral, and then at the end of the day, tally them all up to figure out how much they owe each other, then use a process called settlement to pay each other off.

When all the banks are solvent, we're none the wiser. But what if Chase decides Citibank's about to go under, and decides it can't do those under-the-hood loans for it anymore?

You try using Chase's ATM to pull money out of your Citibank account? BZZZZT!!! Declined. Same thing happens if you use your debit card at a grocery store that happens to bank at Chase - you can't buy groceries there. Say your employer banks at Citibank, but you bank at Chase. When payday comes and they do that wire transfer so you get your paycheck direct-deposited in your account, BZZZT! Declined. No paycheck for you.

You can see that if a lot of banks fail, and a lot more banks stop giving credit to each other, that this could cause our country's entire financial system to derail. Businesses need credit all the time just so they can purchase materials and inventory, pay their employees, etc, and if their credit gets mucked up, they could go bust, and their workers could lose their jobs.

I'll agree that the Bush Administration's proposal to deal with this is not something I'm happy with, though Congress has implemented a tiny few safeguards. Still, a liquidity crisis is BAD. We don't want one.

[Hannah Bell]

79. if you have money in the bank & the bank hasn't failed, you can go to the bank & get it.

& chase is now jpmorgan chase, so i seriously doubt citi will be refusing to honor their checks, as morgan & citi look like they'll be the lucky, lucky players scooping up all those newly cheap assets in the game of last man standing.

there are many ways to maintain liquidity. trust our so-called leaders to come up with such a stupid one - that in fact, doesn't.

[Orangepeel]

81. which may well cause a run.

it isn't like your bank has all the money in a vault in the back. They keep a small percentage on hand for normal withdrawals and invest the rest.

[Hannah Bell]

86. maybe. & maybe al-qaeda will strike in la. the point stands: unless your bank is bust,

you can use your money. a liquidity crisis is a CREDIT crisis, not a SAVINGS withdrawl crisis.

unlike gold, you don't have to mine paper money; &, since these aren't normal times, any bank with good management is going to have lots of cash on hand. they can get as much paper as they like - they just have to book it.

BTW, in private, the big players are saying they don't really need the money right now anyway.

So that was just hype to stampede the public, after all.

[eridani]

66. So, instead of giving Treasury superhuman powers to inject the liquidity--

--why can't a committee appointed by Congress do it?

[backscatter712]

77. Works for me.

At least Congress got some concessions out of the Bushies this time instead of giving them a completely blank check. Not enough, but some.

And I do like Kucinich's idea of dealing with the liquidity crisis by bailing out individual homeowners who are facing foreclosure instead of bailing out the banks. I wish Congress would consider that.

[Hannah Bell]

53. No, it doesn't mean that. "Everything" didn't collapse, even in the great

depression, & there was no universal refusal to honor checks or transfers.

[moodforaday]

62. Yes, and

then Cuba invades Florida, and Al Qaeda invades everywhere else, and every bank will expire in a mushroom cloud, and Mahmoud Ahmadinejad will ride a Russian nuclear missile bareback right into the Capitol Hill, and Saddam will rise from the dead and assume presidency of the United States for ever and ever. And the dollar will bear the face of Vladimir Putin, but you will never see the dollar again, because you'll be slaving away in a chaingang for the Bin Laden Satanic World Corporation. It's all totally going to happen UNLESS THE DEMS GIVE BUSH WHAT HE WANTS. It's always been that way.

The OP asked for specifics. You didn't provide specifics.

[PVnRT]

68. Specifics have been provided, many times

And people like you refuse to listen, just wanting to continue with the OMGZ TEH GUBMINT IS EVILL!!!1!! shit.

The bill that will be voted on today is nothing like the Paulson plan, gives taxpayers an equity stake in what is being bought, requires Congressional oversight and approval of all funds beyond the first $250B, yet to some here, it's the Turn America Fascist Act of 2008.

[livelongandprosper]

71. Which is why the markets hate it. Hong Kong fell 4.3%

Europe is coming then Wall Street.

[moodforaday]

82. But credit freeze is NOT a preordained outcome

It doesn't have to happen. People who run the financial corporations have self-preservation instinct, too. See this opinion for example:

The Fiscally Insane Bailout Bill Might Not Pass -- Here's 5 Reasons It Shouldn't | AlterNet

(...)
"Harvard's Ken Rogoff, a Former Federal Rerserve and IMF official, insists that the prospect of this bailout is, unto itself, taking a manageable problem and making it into a more intense crisis. He says that credit is frozen primarily because banks want to avoid dealing with other banks that might drive a hard bargain, and instead would rather wait for free money from the government. Without the prospect of that free money, Rogoff suggests that credit would probably begin moving again, if slowly."
(...)

http://www.alternet.org/columnists/story/100700/the_fiscally_insane_bailout_bill_might_not_pass_--_here%27s_5_reasons_it_shouldn%27t/?page=entire

[moodforaday]

83. ...and well,

since you put it in these terms, the government IS evil, in case you haven't been paying attention for the last 7 years. Every major decision was a turn for the worse - every single one.

[Hannah Bell]

88. um - this government IS evil. i think that's been proven repeatedly.

and the markets aren't liking this corporate bailout. now you're 700 billion poorer & it's STILL crashing. Scared yet? Oooh, if we just do what daddy says he'll stop hitting us.

[ClayZ]

4. The birds would still come to my bird feeder!

Free lunch there always!

That much I know!


I love barter fairs! http://www.barterfaire.org/

[stray cat]

67. True - but only if you can still afford the bird feed

:hi:

[Selatius]

5. The Great Depression was exasperated because large banks were allowed to fail.

Many businesses take out loans or bridge loans to pay for things now and then pay it back later when the cash flow comes in.

However, if banks don't get help, what happens is some of them will fold, and other banks will tighten lending because of runs on the bank by scared depositors. The bank would want money on hand to cover all the withdrawal requests rather than using that money to lend out to businesses.

A functioning economy needs money circulating through it to create jobs for people, to give them something to do, but if banks are down, money is not moving as quickly or even not at all. Think of it like blood moving through the body. If you don't get enough circulation to your limbs, they will wither and die.

The same is true with the banking system. It's a venue where people basically give businesses and individuals loans by depositing money in the bank. The deposited money is then handed out to these businesses at interest. Some of this interest comes back to you if you have an interest-bearing savings account. The rest, of course, is profits for the bank.

If the bank won't lend out money, the businesses will get less cash to run operations. Slowed operations means workers get laid off, and other workers are not hired. With higher unemployment, demand for products and services declines. You would then have a recession, and if the collapse is wide enough, the recession would be a depression instead.

[cui bono]

13. While I'm sure you are exasperated, I think you meant exacerbated.

;)

[Kurt_and_Hunter]

6. Here's one version (not advocated, merely offered, since you asked)

The financial system could face a meltdown of 1929 proportions unless US politicians succeed in their efforts for a $700bn rescue scheme, experts added.

The warning came as Republicans and Democrats met in Washington for a rare weekend debating session to attempt to seal agreement on the contentious plan, aimed at preventing a long-lasting recession in the US.

Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.

One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow . That could happen in just a couple of days.

“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3094318/Bailout-failure-will-cause-US-crash.html

[still_one]

7. A liquidity crisis, and complete financial collapse

What does that mean?

It means that business which use credit for their inventory would not be able to do so

Money would become extremely tight, and loans would effectively dry up. This would affect small and large businesses, mortgages, and credit cards. Money would NOT be available.

This would lead to massive job losses, and the economy would effectively shut down

[moodforaday]

63. In order to believe that

you have to believe that banks have no interest in self-preservation. And you have to trust that the people who created this mess are the only ones who know what needs to be done to save it.

If you find a bomb in the building, you don't ask the terrorist who put it there to dismantle it for you. You call on the bomb squad.

You are being blackmailed, DUers.

[BigBearJohn]

8. Thanks for all our responses.

[liberalmuse]

9. About the same, except...

WE won't be slaves to excessive taxes for generations to come, and the rich assholes pulling this heist (The Bush Administration and their cronies) won't get a huge wad of OUR cash, our children's cash, their children's cash, and so on to the 7th generation.

Have you read this fucking bill? It's the SAME GODDAMNED PIECE OF SHIT BILL PAULSEN PROPOSED, only they put in meaningless shit as a diversion to try and fool Americans, who they obviously think are total idiots. The Treasury Secretary still gets absolute power, btw. I'm getting angry again...

[BigBearJohn]

12. So, if you have $175,000 in cash in your safe at home, will you do ok?

[dailykoff]

16. No, You will not do okay whatever happens.

Sorry.

[cui bono]

22. Can you explain please?

[dailykoff]

29. Explain what exactly?

[cui bono]

39. Nevermind. I already saw your fucked up response to my other post.

[dailykoff]

40. Aw, did someone's feathers get ruffled?

:nopity:

[cui bono]

44. No, I just saw that any response from you is worthless.

[Hannah Bell]

57. Except plenty of people actually did do ok, even in the depression.

sorry, blanket prophecies aren't helpful.

[PVnRT]

69. Christ, is this the argument now?

"Hey, some people did OK during the Great Depression, so let's chance it. Things weren't really that bad."

[Hannah Bell]

78. no, it's the response to folks who tell others they're NOT going to be ok

as if they were prophets.

[liberalmuse]

24. Only if you put it in tangibles...

such as precious metals (gold, silver, etc), foodstuffs, supplies, a good bike, propane, biodiesel kits (both for your car and and to mix in your garage (fuels). In other words, things you can barter with, and survive on if you had to, because it is possible the dollar would drop significantly, even with the passage of the bailout. I've also read banks could fail faster because of the bailout. Buy land, if you can. I know it's short notice, but money could quickly become just a worthless piece of paper.

[CreekDog]

52. your plan is to make it on your own, society can fall apart but you will survive based on your wits

yeah right buddy! :eyes:

[BigBearJohn]

55. Jeesh.... Thanks a lot. I'm just wondering if I will survive. Is that ok with you?

[CreekDog]

58. your question was fine, Muse's answer had me shaking my head

:hi:

[BigBearJohn]

59. oh. Thanks for clearing that up.

[galileoreloaded]

80. Good thing no one in history has ever been faced with having to fend for themselves..

I just don't know how my ancestors made it.

[Mojorabbit]

50. I think to be ok in that scenario

you would have to grow your food as it takes short term loans for supermarkets to buy their inventory and pay for the shipping. Farmers take out loans for seeds etc before planting so there might be a decrease in food grown. Dr's offices pay for supplies by credit card as well as hospitals, I'd imagine so might be a shortage when you need health care as everyone would have to pay cash.

[cui bono]

17. Argh. I haven't read it. I stupidly believed Pelosi when she said

that it would be of no cost to taxpayers.

Do you have a link for it?

[liberalmuse]

34. I downloaded it...

110 pages. Here it is, first link:

http://banking.senate.gov/public/index.cfm?FuseAction=Articles.Detail&Article_id=4d84ffcc-c299-4081-b76a-da2c4fe3a1b7&Month=9&Year=2008

Here is a good link explaining the bill (you also might want to click the links in the article):

http://www.clusterstock.com/2008/9/analyzing-the-bailout-what-s-in-it-anyway-

[cui bono]

35. Thanks.

:)

[cui bono]

10. Here's a couple links to good DU posts by HamdenRice

How your cashing a check is related to the current credit catastrophe:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=4027506

The collapse of the sub-prime market & the liquidity crunch explained through It's a Wonderful Life:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=1561876

[dailykoff]

14. The wind will blow and the seventh seal of the seventh ray will

be very very upset so please shut up and fork over the 7 billion and stop asking stupid questions, thanks.

[BigBearJohn]

18. but will the sun still come out six months from now?

[dailykoff]

23. Only if Nancy signs the check.

Otherwise, it might, but then it might not. Better we do it just to be sure, ya know?

ps :heavy sarcasm:

[dailykoff]

19. And by the way the "real people" scenarios being spun in this thread are BS.

I'm embarrassed for all the couch potatoes eating this stuff up. :blush:

oh and that includes the "but krugman sez it's okay!!" crowd. Clue: Krugster is a propagandist.

[cui bono]

20. Can you explain please?

[dailykoff]

26. explain what? That you're still going to have to make your fucking loan payments?

How the hell do you think you're going to pay them if suddenly banks don't accept checks? How freaking gullible can you be?

[cui bono]

37. How big of an asshole can you be?

You make vague comments then you yell at me for asking you to clarify?

Do you really think you made a good point by saying this?:
"And by the way the "real people" scenarios being spun in this thread are BS.

I'm embarrassed for all the couch potatoes eating this stuff up. :blush:

oh and that includes the "but krugman sez it's okay!!" crowd. Clue: Krugster is a propagandist."

Oh yeah, that really explains what you're talking about. Geez. What an ass.

[dailykoff]

38. I'm not the cluck warning all the other chickens that the sky is falling. (n/t)

[cui bono]

41. That has nothing to do with anything, especially your rudeness and inablility to express thoughts.

[dailykoff]

45. There there. Have some corn meal.

:crazy:

[Hannah Bell]

90. good one. yes, your check won't work: you're going to have to line up for the 666 on your forehead.

[melody]

42. Some of the greatest economists in the world can't predict what will happen

And yet *you* know?

[dailykoff]

47. I see you took me off your ignore list.

Maybe you'd better rethink that.

[melody]

85. Thanks for the reminder. n/t

[MichaelHarris]

15. I think

that short term loans would dry up leaving some small businesses unable to get loans for payrolls. Fewer students could get loans and the middle class as a whole would suffer. It really boils down to buying and selling debt. There is a downside no one mentions. By giving the money to the companies and not punishing those who did the "predatory" lending we run the risk of it happening again. CEOs sitting back saying, "Uncle Sam will bail us out, they did once already".

If debt doesn't move on a free market then that market becomes stagnant. It's a bad thing but when they found a way to make money buying and selling debt profitable we all lost. These companies are going to get their money, either from the government or from others with debt. If the government didn't feed money into the system the system would have drained it's users. Higher interests, fewer loans, fees, they can be very creative.

For this bill to be any good it has to have three things, it would be terrible for the taxpayer if these three things were not included. Oversite, accountability, and return. A board will need to be set up to monitor those who caused this. Historically it was Reagan but we can't dig him up and kick him. That's the oversite, not kicking Reagan but monitoring those who did this. Accountability, those who did this cannot profit from it. This is a must. I would think prison terms should be in order for anyone who does profit. Ask Keating and McCain, they'll fill you in. Finally, return. With proper management these companies will become profitable again. Buying and selling your debt is big business, that's why they do it. When they begin to make money that money should come back to us, the taxpayer. Just as Alaskans get oil revenues we should all get them from this.

So going back to the original question, it would be short term loans for business, school, cars. Pretty much everything you and I may need. Ford would be able to get loans but middle America would find it harder. How hard is anyone's guess, that's where the crystal ball would come in handy.

The problem for us Democrats is this, the Republicans are pretty much letting us "own" this bill. Americans hate that it is happening. What do you think the Republicans will use in November before the elections? Democrats caving to big business. They are staying away from the cameras and mikes. Come November we will pay for this. Democrats in Washington need to find a way to make the Republicans "own" part of this solution. It will need to be done is way to make it stick. Voters don't have long-term memories.

[BigBearJohn]

21. thanks for your insights

:toast:

[MichaelHarris]

25. you're welcome

I added a bit more. It's a horrible thing they had to do but it could have hurt middle America. We won't know now, hopefully.

[Wetzelbill]

27. the most frequent explanation I've heard

and that makes the most sense to me, is it would cause a breakdown in credit. Banks wouldn't trust each other and loan each other money either. I heard it would be tough to cash a check except at your own bank. But mainly what I've read is the credit situation would make it tough to get loans, for businesses, for students etc.

[moodforaday]

64. This is being said but

people and corporations have this thing called self-preservation. I don't think they will let the scenario you describe happen, since they would stand to lose everything (yes, just like everyone else). It just doesn't make sense.

[scarletwoman]

28. Think about the consequences OF passing it:

We've once again been stampeded over a cliff

As with the Patriot Act and the Iraq War, this administration has used Fear, pumped up, hyperfear to stampede Congress and the country right on over the cliff like a herd of mindless cattle.

It looks like the bailout plan is going to be approved by Congress, and we'll start doling out money to Wall St., not Main St. sometime next week. Yes, yes, the markets will soar, there will be much self congratulation, but enormity of this mistake will not be discussed.

This bail out is going to require us to issue, at least initially, 250 billion dollars worth of US Treasury Bonds, hoping somebody will buy them up so that we can afford this bailout. The trouble is, our bonds are in serious danger of being downgraded. Already there were some commercial houses downgrading US Treasury Bonds before this hyper fear event started, anymore debt and we'll see them officially downgraded. When this happens, we're screwed. We won't have the money to fund any government services. Our government, country and economy will collapse, further and faster than any supposed "Second Great Depression" whose specter was used to stampede us over the cliff. This is an economic reality.

Another economic reality is that this injection of cash and liquidity is going to devalue the dollar, driving up inflation. We can look forward to crippling, perhaps even hyper inflation. The gift that keeps on giving.

All this bailout is going to do is give the US three to six months. It will allow Bush to get out of office clean, and put off the inevitable until after the election. You have that amount of time to prepare for the upcoming perfect economic storm. I suggest that you use it wisely. Buckle up, this is going to be an unusually bumpy ride, with a landing so hard at the end that some of us won't survive.

sw

[BigBearJohn]

31. Gee... human lemmings

[dailykoff]

30. ANSWER: We inflict 7 billion less debt on our children, PERIOD.

Anybody who hasn't figured out that BUSH LIES is really, really lame.

[BigBearJohn]

33. So, are we gonna have a big bonfire or what? I'll bring the marshmallows...

you can bring the weenies...

[dailykoff]

36. Oh I'll be there, tossing in the Patriot Act and the No Fly list

and all the other illegal horrible crap we've been swindled into buying the last 8 years.

:grr:

[BigBearJohn]

43. Can you just picture the back rooms as the fat cats chew on their cigars having a big laugh at

taxpayer expense!

"Those fools, we can dish out ANYTHING to them,
and they'll come beggin' for more."

:nuke:

[dailykoff]

46. They've been laughing for eight years.

No reason to stop now.

[seabeyond]

73. but that isnt realy true either is it. there will be pay back. again another unknown how much

but to say it is 700 billion debt to our children isnt correct

[BigBearJohn]

32. ...and now for a little spice thrown in -- a few words from Michael Moore on the bailout

Friends,

Let me cut to the chase. The biggest robbery in the history of this country is taking place as you read this. Though no guns are being used, 300 million hostages are being taken. Make no mistake about it: After stealing a half trillion dollars to line the pockets of their war-profiteering backers for the past five years, after lining the pockets of their fellow oilmen to the tune of over a hundred billion dollars in just the last two years, Bush and his cronies -- who must soon vacate the White House -- are looting the U.S. Treasury of every dollar they can grab. They are swiping as much of the silverware as they can on their way out the door.

No matter what they say, no matter how many scare words they use, they are up to their old tricks of creating fear and confusion in order to make and keep themselves and the upper one percent filthy rich. Just read the first four paragraphs of the lead story in last Monday's New York Times and you can see what the real deal is:


"Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

"Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

"At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

"Nobody wants to be left out of Treasury's proposal to buy up bad assets of financial institutions."

Unbelievable. Wall Street and its backers created this mess and now they are going to clean up like bandits. Even Rudy Giuliani is lobbying for his firm to be hired (and paid) to "consult" in the bailout.

The problem is, nobody truly knows what this "collapse" is all about. Even Treasury Secretary Paulson admitted he doesn't know the exact amount that is needed (he just picked the $700 billion number out of his head!). The head of the congressional budget office said he can't figure it out nor can he explain it to anyone.

And yet, they are screeching about how the end is near! Panic! Recession! The Great Depression! Y2K! Bird flu! Killer bees! We must pass the bailout bill today!! The sky is falling! The sky is falling!

Falling for whom? NOTHING in this "bailout" package will lower the price of the gas you have to put in your car to get to work. NOTHING in this bill will protect you from losing your home. NOTHING in this bill will give you health insurance.

Health insurance? Mike, why are you bringing this up? What's this got to do with the Wall Street collapse?

It has everything to do with it. This so-called "collapse" was triggered by the massive defaulting and foreclosures going on with people's home mortgages. Do you know why so many Americans are losing their homes? To hear the Republicans describe it, it's because too many working class idiots were given mortgages that they really couldn't afford. Here's the truth: The number one cause of people declaring bankruptcy is because of medical bills. Let me state this simply: If we had had universal health coverage, this mortgage "crisis" may never have happened.

This bailout's mission is to protect the obscene amount of wealth that has been accumulated in the last eight years. It's to protect the top shareholders who own and control corporate America. It's to make sure their yachts and mansions and "way of life" go uninterrupted while the rest of America suffers and struggles to pay the bills. Let the rich suffer for once. Let them pay for the bailout. We are spending 400 million dollars a day on the war in Iraq. Let them end the war immediately and save us all another half-trillion dollars!

I have to stop writing this and you have to stop reading it. They are staging a financial coup this morning in our country. They are hoping Congress will act fast before they stop to think, before we have a chance to stop them ourselves. So stop reading this and do something -- NOW! Here's what you can do immediately:

1. Call or e-mail Senator Obama. Tell him he does not need to be sitting there trying to help prop up Bush and Cheney and the mess they've made. Tell him we know he has the smarts to slow this thing down and figure out what's the best route to take. Tell him the rich have to pay for whatever help is offered. Use the leverage we have now to insist on a moratorium on home foreclosures, to insist on a move to universal health coverage, and tell him that we the people need to be in charge of the economic decisions that affect our lives, not the barons of Wall Street.

2. Take to the streets. Participate in one of the hundreds of quickly-called demonstrations that are taking place all over the country (especially those near Wall Street and DC).

3. Call your Representative in Congress and your Senators. (click here to find their phone numbers). Tell them what you told Senator Obama.

When you screw up in life, there is hell to pay. Each and every one of you reading this knows that basic lesson and has paid the consequences of your actions at some point. In this great democracy, we cannot let there be one set of rules for the vast majority of hard-working citizens, and another set of rules for the elite, who, when they screw up, are handed one more gift on a silver platter. No more! Not again!

Yours,
Michael Moore
[email protected]
MichaelMoore.com

P.S. Having read further the details of this bailout bill, you need to know you are being lied to. They talk about how they will prevent golden parachutes. It says NOTHING about what these executives and fat cats will make in SALARY. According to Rep. Brad Sherman of California, these top managers will continue to receive million-dollar-a-month paychecks under this new bill. There is no direct ownership given to the American people for the money being handed over. Foreign banks and investors will be allowed to receive billion-dollar handouts. A large chunk of this $700 billion is going to be given directly to Chinese and Middle Eastern banks. There is NO guarantee of ever seeing that money again.

P.P.S. From talking to people I know in DC, they say the reason so many Dems are behind this is because Wall Street this weekend put a gun to their heads and said either turn over the $700 billion or the first thing we'll start blowing up are the pension funds and 401(k)s of your middle class constituents. The Dems are scared they may make good on their threat. But this is not the time to back down or act like the typical Democrat we have witnessed for the last eight years. The Dems handed a stolen election over to Bush. The Dems gave Bush the votes he needed to invade a sovereign country. Once they took over Congress in 2007, they refused to pull the plug on the war. And now they have been cowered into being accomplices in the crime of the century. You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW.

[cui bono]

61. This should be its own thread if it isn't already. n/t

[tkmorris]

48. No. No one knows, even those who say they do

It is alleged, as you are probably aware, that there is a severe liquidity crisis which, if unaddressed, will result in a halt to credit or trade between banks. Those who say so have so far not produced evidence that such a crunch is in fact imminent, at least not to my satisfaction. It's certainly possible, the boogeyman does in fact exist in this case, but how soon such a thing would happen, or even that it will, is uncertain. If that DID happen the results would indeed be dire. Many, many businesses would fail in every industry, high unemployment, super tight credit if any at all, and so on. In addition the all of the bank failures and stock market crashing of course.

You will see a few posters here who do in fact have that most esoteric of knowledge; they understand to some extent how the economy functions at that level. If we have any experts here on the topic, it would be these few, and to be fair most of them argue that we do in fact have a very real problem and it needs to be dealt with sooner rather than later. However I am troubled because none of them actually prove the case, they merely make scary predictions and dismiss anyone as an idiot who doesn't speak the same language they do.

What we have before us is a bailout plan that has the potential to cost every man woman and child in the United States over $2400 in future taxes, more if you include interest payments (servicing the federal debt), and more still if, as some predict, the program will cost more than is estimated currently. This would indebt my household alone to well over $12,000 in future taxation, and yet no one in Congress or on Wall St seems terribly interested in asking me what I think of all this, or even bothering to try to explain it to those who desperately need a primer. They aren't even trying to make a case for it, not really, they are just trying to ram it through. That raises a whole field full of red flags for me. My initial scan of the proposed bill isn't helping my indigestion any either.

[BigBearJohn]

54. thanks

[SmokingJacket]

74. Thanks for this -- it's my take as well.

I'm an economic ignoramus, I confess, and I'm willing to trust the judgments of those better informed. That said, it is very difficult to roll over and give Paulson whatever he wants. It feels like it's propping up a broken system.

I haven't seen anything to indicate how the $700 bn will do anything to fix the system in the future. I believe that not handing over the cash will cause have dire consequences, but I feel like Wall Street has made BIG FRICKING MISTAKES and it needs to be held accountable *somehow.*

[CreekDog]

56. This is a great thread overall, it's very informative(at least messages answering your question are)

thanks! :hi:

[BigBearJohn]

60. Quite welcome. I think it is good to discuss things. My cousins and I are very nervous about this.

[moodforaday]

65. It really depends on who you trust.

Hank Paulson - or Joseph Stiglitz?

[seabeyond]

75. the bitch is when you dont trust any of them. and reality, ... that is the prudent way. n/t

[Tierra_y_Libertad]

70. "There is no safety in the Cosmos" - Alan Watts

[newportdadde]

84. Maybe decent CD rates? Cats and dogs liviging together! Housing and stock return to real values?

Either way we are screwed. I've seen this coming for 5 years. The choices now are do the bailout, print money, inflate away the value of pensions, the dollar, wages etc.

Or

No bailout, stock market drops 20%, pensions suffer, houses dips, wages suffer.

Either path provides much pain and is now for all intents and purposes is unavoidable. The difference is a bailout does not treat the symptoms, its like giving a junkie money for another hit, they will be back and for more. Its time to detox and give our financial system a chance to build itself back on real fundamentals.

For the record I do not believe any of this fear mongering bullshit about no car loans, house loans etc. Now you may actually need to have money down... *GASP* like in the olden days but people still need to buy and business still need to sell, its not all going to collapse.

All of this gloom and doom is the same as a someone trying to sell you that undercoat on your car.. a bunch of crap.

Remember people this is the same media and Washington establishment that sold you all a bill of goods on WMD and Iraq, never ever forget that they are liars. They don't mind lying and getting kids killed what makes you think they care about lying about money.

[davekriss]

87. I think what happens is as follows....

Everyone who has invested in mortgage-backed-securities (MBS) find their investments marked to a frozen market, which means the MBS continue to decline in value and markedly so. Retirement plans, money market funds, bank portfolios, insurance company portfolios, etc., to the extent they're invested in MBS, decline in value.

Commercial banks and thrifts need a certain amount of reserves before they can lend (they lend many multiples over these reserves). As their balance sheet erodes per above, their ability to lend declines. Credit contracts in the market. The ability of businesses to borrow to finance inventories and payrolls declines, so they lay off workers. These workers can't buy rerigerators and cars and TV sets. Businesses, already laying off due to finance problems, face declining demand for their goods and services, so they lay off more and we have the classic downward spiral into a severe recession or depression. (Note I haven't even touched what happens to pensions, insurance costs, etc., there's even more joy to uncover.)

We are already in a recession, the question is how deep. Note the patterns in the following:



THe question before us is how high the spike in unemployment will go, and thus how wide the gray recession band will be.

Note the erosion of lending institutions ability to lend:



It ain't pretty, what we're facing. It is a never-seen-before-event. Inaction spells certain pain for everyone. Proposed actions may not be able to head that off. Our choices are not that great.

[Marie26]

89. Whoa

How could there be such a steep dive in reserves in one year? Is it that they suddenly lent out more, or that those reserves became worthless? Or did they not really have sufficient reserves at all & that just now is coming out?

[davekriss]

91. Marked to Market

The lending institutions that own mortgage backed securities (or that still have mortgages on their books) have seen a dramatic decline in the value of these assets. They are, by rule, marked to market. If, for whatever reason (perhaps a diminished market appetite for risk peppered by discovery of fraudulent packaging), few are willing to give a seller their asking price, the market value of that security falls. How far depends on the eventual price the seller receives for the asset. It could be cents on the dollar, it could even be zero (if no buyer is found). Lending institutions are forced (rightfully) to mark the asset to market. So if, say, they get offers at 20 cents on the dollar, the asset value on their balance sheets reflect an 80% loss. This is what has been happening. The seller is forced to write down the value of their portfolio to the point where they fall off the cliff per the above graphic. As balance sheet positions deteriorate, the ability of lending institutions to extend new credit declines. Ipso facto we have a credit contraction. Which, of course, was the cause of the Great Depression.

Note this is just my opinion of what's happening. Truly I hope I am wrong.

[Marie26]

92. Thank you!

That was a great, succinct explanation of what's been happening. That's a pretty scary chart - it shows that the banks are actually in the *negative* now in terms of reserves. Doesn't that make the banks technically insolvent at this point? It looks like they've basically been borrowing money from the Fed. Reserve to even stay in operation.

Yet another Very Scary Chart:

[davekriss]

95. I usually post that one too

And one or two more. Yes, that means a great many banks out there are already insolvent. You and I have not posted the series dates of the Fed graphics, but since they've been published (very recently) there have been several major bank failures, i.e. Wachovia and WaMu. This does not mean every bank is insolvent, but in aggregate as an industry all are in bad shape. Thus the crisis. It is 1929-1931 all over again. Unfortunately, many of us are about to experience an involuntary extended vacation (as unemployment rises).

[Marie26]

96. I hope not

But it sounds like you're right.