[toofasttooslow]

http://biz.yahoo.com/ap/080920/financial_meltdown.html

AP
Bush team, Congress negotiate $700B bailout
Saturday September 20, 7:52 pm ET
By Julie Hirschfeld Davis and Deb Riechmann, Associated Press Writers

Bush team, Congress negotiate bailout as Democrats seek homeowner help, executive pay caps


WASHINGTON (AP) -- The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.


...blah blah blah...


The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.




And get ready for it...

Here it comes....

The best part...



The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow Treasury to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

[scottwww]

Originally Posted by gum5h03

The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow Treasury to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

Oh man! What might that mean? Those are fearful words standing alone like that.

[toofasttooslow]

Originally Posted by scottwww

Oh man! What might that mean? Those are fearful words standing alone like that.

That's the exact context of the article. I was shocked when I saw it. Either they are totally wrong or we are headed for state sponsored capitalism.

[scottwww]

Senate Majority Leader Harry Reid, D-Nev. said "we cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic. Every single American has a stake in preventing a global financial meltdown."
~
Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive compensation limits and new foreclosure-prevention measures.

What are "executive compensation limits"?

[toofasttooslow]

Originally Posted by scottwww

What are "executive compensation limits"?

Why I'm not sure comrade, what does that mean?

[scottwww]

Originally Posted by gum5h03

Why I'm not sure comrade, what does that mean?

Would that be "executive compensation limits" for the financial institutions that are mandated to be agents of the government? Or would that be for all financial institutions? Or all executives of private businesses? All levels of executives?

Gotta find a copy of the proposed bill.

[toofasttooslow]

Originally Posted by scottwww

Would that be "executive compensation limits" for the financial institutions that are mandated to be agents of the government? Or would that be for all financial institutions? Or all executives of private businesses? All levels of executives?

Gotta find a copy of the proposed bill.

Let me know if you find one. As of now it's all hearsay and speculation. They (our esteemed Congress and SEC) started acting on it (banning shorts, giving money to AIG) before they really thought it through and started writing the bill.

BTW, why do I feel like a lamb off to slaughter?

[toofasttooslow]

Found a possible draft here:

http://globaleconomicanalysis.blogsp...llion-bailout-
proposal.html

Site is being hammered and it took me a few tries so I pasted it below.



The New York Times has the Text of Draft Proposal for Bailout Plan. Given this is legislation, under fair use terms, here is the complete draft. My thoughts follow.


LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.
Weep For The Taxpayer

Notice that this bill raises the national debt. Notice that the bill is supposed to take into consideration "protecting the taxpayer".

The reality is this bill does not and cannot protect the taxpayer. Rather this bill only promises to take the taxpayer into consideration. The Treasury will indeed take the taxpayer into consideration, then immediately discard any such ideas.

Inquiring minds are also noting "The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."

The idea behind the above statement is to allow for a continual dumping ground such that there will always be $700 billion in toxic garbage held under this program. As soon as any asset can be unloaded by the Treasury at cost, another toxic loan is eligible to be assumed on the books of the Treasury. This process can last for as long as two years.

Unconstitutional Provisions

Pay particular attention to section 8.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Essentially the law will state that whatever the Treasury does it is above the law. Such a provision is undoubtedly unconstitutional.

Weep For The Free Market

It's time to Weep For The Free Market (or rather what little free market the US had left).

Weep For The Unites States of America

At taxpayer expense, Bernanke and Paulson are willing to bail out their banking buddies at enormous expense to the average taxpayer of this country. Bernanke and Paulson should both should be fired. Instead Congressional sheep will baa yes to this bailout and Bush will baa yes when he signs it. It is a sickeningly sad that day for America that Congress will go along with this proposal that makes the US Taxpayer A Giant Dumpster For Illiquid Assets.

$700 billion will be wasted by this program and it is $700 billion the US does not have to waste. I ask that everyone vote against any congressman who votes for the passage of this bill.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

[DFW_M]

When he took the office, the National debt was <$6T...
When he leaves, it will be $11.5T

[scottwww]

My wife and I are talking about moving out of our mutual funds to cash and money markets. We figure that the likelihood of the markets increasing 10% over the next few months are not great, yet the risk of the market losing 40% or 50% is too high. We could live with missing out on 10% increase a lot easier than living with 50% loss.

When the short selling is restarted in a couple weeks, what will happen?

[TurboFan]

The parallels to ancient rome and rampant greed in the economy are quite interesting. I've been wondering for years when this was going to come back and bite us in the ass. Our economy clearly moves in cycles, and I'd say we're due for a big whack in the nuts, pardon the technical jargon there.

We as a country have borrowed far beyond our ability to repay. I'm sure no one here has done that, but looking around me, I'd say enough people have severly over-extended themselves to the point where they, and a whole lot of people around them, are pretty seriously screwed.

It's going to get bad, and it has nothing to do with a democrat or a republican in the white house or congress. Generally speaking, I think Government exists to protect us from each other, not from ourselves. People have made far too many stupid financial decisions for the last 20 years, and it is blowing up in our faces.

Why do so many people making $60k/year think the have the right to, or can afford, a $350k house, 2 huge car payments and expensive vacations??? WTF is wrong with this picture? We have become SO impatient as a country, and a world, that we no longer want to put in the work to get the reward, we just want the reward. Well, here we go. It's going to be a bitch of a ride, becuase for every action (reward), there is an equal and opposite reaction (take a look around).

Add on that we've let Wall St. run our companies for the last 20 years, to the point where we are allowing them to torpedo long term vision, goals and stability for short term profit. Kick the sacks of Wall St. shit to the curb, take a lesson from Coke and other companies with their lack of quarterly guidance, and let companies do what they do best. Let Wall St. sit back and play monday morning quarterback, but they can not be allowed to run our companies.

Next, Americans need to wise up to what their skills, or lack there of, are really worth. I'm sorry mister factory worker, you are NOT worth $30/hour to put bolts on a wheel. However, we could do ourselves a huge favor and pay teachers what they are worth, and maybe attract better people to the profession (nothing against teachers, but getting good ones into the trade is damn tough).

I've had any number of arguments with friends and employees about what they should be paid, and it comes down to something very simple - you are worth whatever I can pay someone else to do your job. We have a workforce under 40 that has heard for too long that "it's not whether you win or lose, it's how you play the game" and "how do you feel about that?" and "try your best, that's what counts". Well, I hate to be the bearer of bad news, but that's a bunch of

As an employer, I don't give two shits if you tried your best - I want to see results. I don't care how you feel about a tough decision that had to be made - that's life buddy. Some days I don't feel to good about it either, but I have to push on too. And who's that jackass that said it's how you play the game??? That's fine for my 2 year old son, but a teenager? Nope, it's about whether you win or lose, because the world rewards winners, not whiners.

/rant

disclaimer - I'm under 40, and I really don't care about my spelling errors in this post, or I'd have fixed them already.

[toofasttooslow]

Originally Posted by TurboFan

The parallels to ancient rome and rampant greed in the economy are quite interesting. I've been wondering for years when this was going to come back and bite us in the ass. Our economy clearly moves in cycles, and I'd say we're due for a big whack in the nuts, pardon the technical jargon there.

We as a country have borrowed far beyond our ability to repay. I'm sure no one here has done that, but looking around me, I'd say enough people have severly over-extended themselves to the point where they, and a whole lot of people around them, are pretty seriously screwed.

It's going to get bad, and it has nothing to do with a democrat or a republican in the white house or congress. Generally speaking, I think Government exists to protect us from each other, not from ourselves. People have made far too many stupid financial decisions for the last 20 years, and it is blowing up in our faces.

Why do so many people making $60k/year think the have the right to, or can afford, a $350k house, 2 huge car payments and expensive vacations??? WTF is wrong with this picture? We have become SO impatient as a country, and a world, that we no longer want to put in the work to get the reward, we just want the reward. Well, here we go. It's going to be a bitch of a ride, becuase for every action (reward), there is an equal and opposite reaction (take a look around).

Add on that we've let Wall St. run our companies for the last 20 years, to the point where we are allowing them to torpedo long term vision, goals and stability for short term profit. Kick the sacks of Wall St. shit to the curb, take a lesson from Coke and other companies with their lack of quarterly guidance, and let companies do what they do best. Let Wall St. sit back and play monday morning quarterback, but they can not be allowed to run our companies.

Next, Americans need to wise up to what their skills, or lack there of, are really worth. I'm sorry mister factory worker, you are NOT worth $30/hour to put bolts on a wheel. However, we could do ourselves a huge favor and pay teachers what they are worth, and maybe attract better people to the profession (nothing against teachers, but getting good ones into the trade is damn tough).

I've had any number of arguments with friends and employees about what they should be paid, and it comes down to something very simple - you are worth whatever I can pay someone else to do your job. We have a workforce under 40 that has heard for too long that "it's not whether you win or lose, it's how you play the game" and "how do you feel about that?" and "try your best, that's what counts". Well, I hate to be the bearer of bad news, but that's a bunch of

As an employer, I don't give two shits if you tried your best - I want to see results. I don't care how you feel about a tough decision that had to be made - that's life buddy. Some days I don't feel to good about it either, but I have to push on too. And who's that jackass that said it's how you play the game??? That's fine for my 2 year old son, but a teenager? Nope, it's about whether you win or lose, because the world rewards winners, not whiners.

/rant

disclaimer - I'm under 40, and I really don't care about my spelling errors in this post, or I'd have fixed them already.

[toofasttooslow]

Originally Posted by scottwww

When the short selling is restarted in a couple weeks, what will happen?

I'd be willing to put some money on share prices tanking again. Even more so than they already have (percentage wise). Banning short selling will over inflate the share prices. Once the short selling is on again those over-inflated prices will crash. Short selling is a necessary evil to maintain homeostasis in the market.

[TurboFan]

I think the short selling needs to be halted long enough to let things get sorted out - let some balance sheets get shored up, let some companies be bought. Then let the carnage resume, but I think it will be at a slower pace.

Some of these companies could be resuced by the market place, but if they're allowed to tank via short selling and runs, they'll never have a chance. Who knows when the next Bear Sterns or Merril Lynch will be bought out, and not bought by the taxpayer.

BTW, how do I reserve a week in one of the SoCal houses I've recently bought?

[scottwww]

Originally Posted by TurboFan

BTW, how do I reserve a week in one of the SoCal houses I've recently bought?

First you will have to eject that squatters who are staying there.

[nissan]

Originally Posted by scottwww

I mostly agree would with what you are saying if this were a permanent condition to stop short selling. But it is temporary.

When short selling is restarted, I think that the crisis will largely have subsided in the minds of the general public. This will help prevent a market panic that would cause a great crash.

Since it appears that you are advocating no SEC intervention, would you also advocate for all investors to have at least the same freedom from rules in all their accounts as qualified investors have in their non-retirement accounts?

Yes, I would support something like that b/c people should largely be responsible for the consequences of their decisions in the markets. I find the SEC's def. of an accredited investor to be arbitrary though, I have to admit, I don't know the legislative history on how they came up w/the test.

This 'short ban' list is getting a little ridiculous IMO. GM, GE, LM, AXP all applied to get on that list and all of their applications were approved. WTF?

[scottwww]

Originally Posted by nissan

Yes, I would support something like that b/c people should largely be responsible for the consequences of their decisions in the markets. I find the SEC's def. of an accredited investor to be arbitrary though, I have to admit, I don't know the legislative history on how they came up w/the test.

This 'short ban' list is getting a little ridiculous IMO. GM, GE, LM, AXP all applied to get on that list and all of their applications were approved. WTF?

In Australia they banned ALL short selling for 30 days. I wouldn't be surprised if with the huge moves they have already made, and the 700 billion dollar deal, that congress would also replace the Securities Act with a new one. I doubt that they would relax rules. This congress would almost certainly bring more regulation, rules, requirements, restrictions, etc.

As you, I would also rather everyone were allowed to participate in the markets as qualified investors. I would also like to see all able to receive information like qualified investors do. But this opinion is not without some reservations. Most of us probably couldn't discern between good and bad investment advice. The restrictions are there to protect us.
We tend to devolve to our lowest expectations.

It all has the undesirable effect of limiting our options. I rather favor liberty, freedom, and far less government interference. With this comes the freedom to fail as well as the freedom to succeed.

[RIP-A4]

looks like the US will have to start selling their arsenal....

[toofasttooslow]

How'd that short selling ban work out today? Not so good huh. If I had any long positions I'd be getting out while the getting is still relatively good -which is probably what everybody was doing today. We have a lot more problems that are just on the cusp for financials. These defaults and credit swaps are only the very tip of a massive iceberg that's headin our way. Credit delinquencies are up sharply, retail seems to start being affected, and we're in real jeopardy of losing our AAA credit status as a nation. What happens when we lose that status? What is our largest export ? Answer: the dollar. What is that dollar backed by? Answer: The good credit and faith of the United States. No gold, no silver, not platinum, just our word that we'll pay it back. When that word is tarnished (and it is starting to be because of our corrupt finacial system) other organizations, foreign governments, etc look towards safer returns and pull their investment out of the U.S.

[scottwww]

Originally Posted by gum5h03

How'd that short selling ban work out today? Not so good huh. If I had any long positions I'd be getting out while the getting is still relatively good -which is probably what everybody was doing today. We have a lot more problems that are just on the cusp for financials. These defaults and credit swaps are only the very tip of a massive iceberg that's headin our way. Credit delinquencies are up sharply, retail seems to start being affected, and we're in real jeopardy of losing our AAA credit status as a nation. What happens when we lose that status? What is our largest export ? Answer: the dollar. What is that dollar backed by? Answer: The good credit and faith of the United States. No gold, no silver, not platinum, just our word that we'll pay it back. When that word is tarnished (and it is starting to be because of our corrupt finacial system) other organizations, foreign governments, etc look towards safer returns and pull their investment out of the U.S.

I see the short selling ban as a little bit of a reprieve so that longs can get out of the market if they want, now that the word is out. I am pretty much decided to do just that. This weekend I started putting together a listing of all my accounts, so I can plan my exit. I just hate to put it in cash and money market funds.

BTW: last week the first loss in a money market fund was incurred where the dollar was worth 97 cents.

I would move more into mutual funds in foreign markets, but the risk crosses borders. Gold is not really a good option as it is not the basis of our currency. Most of mine is tied up in retirement accounts, so there are a lot of restrictions. I can't just liquidate and buy real estate with it.

What are some good options?

[toofasttooslow]

Originally Posted by scottwww

What are some good options?

Personally I'm looking back at ETF's and specifically munibond funds. I owned several thousand shares of a munibond fund a few years back. It was fairly stable and the dividends were nice. Not much in the way of growth however.

[scottwww]

Have you looked at TIPS? In one of my accounts (401k) I have a TIPS fund. It has been easily the best gains over the last year (11.87%). I wonder what it would do in a market melt-down.