How We Can Fix a Crisis We Did Not Create

Dear Fools,

Yesterday, we asked for your help in passing a bill that we, after much deliberation, believe would protect the taxpayer. The volume and outrage of many of your responses was impressive, to say the least. We need to provide more context.

First, understand that we are as frustrated as you are about this situation. There was incompetence, negligence, and outright fraud, and we're angry about the liberties some have taken in abusing our capital markets. However, we need to confront a brutal reality: The condition of the credit markets jeopardizes our economy.

Our position on this is governed by three overriding principles:

  1. That letting massive portions of our financial sector fail would have enormous negative effects across our economy.
  2. That although we'd prefer a free-market solution, the U.S. government is the only entity with resources sufficient to make a significant impact.
  3. That government intervention must protect the interests of the American taxpayer.

As stock-market investors, we may not focus that much on the credit markets, so it is critical to remember how much the credit markets mean to our way of life. Credit accounts for the overwhelming majority of the money supply in our economy.

If the reliability of our credit markets is undermined, there are innumerable consequences. For the economy, the credit crisis means lower investment, lower spending, recession, business failures, and a massively devalued stock market. For the average taxpayer, this means watching 401(k)s plummet and putting on hold plans to retire, buy a house, or go to college, and for many it will mean layoffs, foreclosure, and bankruptcy. This type of crisis is not only unacceptable but also unnecessary.

While we greatly prefer free-market solutions, this is a time for government intervention, because only our Treasury has the resources to help our financial system get back on its feet. If the crisis persists, we could be in for a consumer depression, which would hurt us all far more than it would cost us to prevent it today. We do not say this with any pleasure: The choice is between taxpayers taking on the responsibility for this crisis in an orderly fashion or a non-orderly one. Either way, we're on the hook to clean up the mess.

Taxpayer rewards
Now, as we begrudgingly support intervention today, we demand that taxpayers' interests be the dominating priority. There are far too many details and too many other people working directly on this for us to be prescriptive here. What we are demanding are certain standards of minimum acceptability during any financial repair.

The plan must be effective at restoring confidence in our capital markets. The banks should pay a fair price for the capital. And we believe the deals should include some form of equity (such as warrants) from the banks requiring relief. Similar steps have been taken with Fannie Mae (NYSE: FNM  ) , Freddie Mac (NYSE: FRE  ) , and AIG (NYSE: AIG  ) . Taxpayers deserve upside for investing capital to fix a crisis they did not create.

Please note, we are not advocating long-term government ownership of this equity. At some point down the road, the government should be required to liquidate its equity position in the recovered banks, but this is a detail to be worked out later. As stated earlier, at this point we are mainly concerned with ensuring a minimum level of taxpayer protection.

Just as Warren Buffett cut an excellent deal with Goldman Sachs (NYSE: GS  ) this week, the government needs to strike an excellent deal on behalf of taxpayers. We should participate in the value creation brought about by the "second lives" we are providing. And these profits the government makes should be returned to the taxpayers.

If you are in agreement with these principles, please send an email similar to this one (from Fool community member jeffbas) to your elected officials. Find their email addresses at www.house.gov and www.senate.gov.

Fools, these are extraordinary times. This is not business as usual. Our country and system are the greatest the world has known; indeed, the rest of the world needs us to make this right. We will get through this. We need to demand that our leaders get us through this in ways that serve the best interests of their investors -- taxpayers in America.

Fool on.

Scott Schedler, President, The Motley Fool

P.S. Our discussion board on this issue remains lively with opinions, so please come and share yours with us.

Motley Fool President Scott Schedler owns no shares of any company mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (273) | Recommend This Article (96)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 26, 2008, at 4:35 PM, spongeworthyusa wrote:

    OK, guys, again I ask you what are these ominous "negative effects" upon which you base your entire support for this bailout?

    How are these effects better or worse than the massive hyperinflation we can expect from injection of $700,000,000,000.00 of money created literally out of thin air?

    What about the moral hazard of this bailout?

    Why should Wall Street mend its ways when most likely next time the temptation for easy money comes along they won't be able to resist again?

    Could you please stop your fearmongering when you can't even describe what it is we should fear?

    I understand that credit availability is going to contract, resulting in a lot of bankruptcies of individuals and corporations that depend on debt for their existence. I say, bring it on. The problem is we already have way, way,way too much credit that is probably ultimately going to be bad debt. Why stick the people who had no hand in creating the credit or using the credit with the bill for the others' irresponsibility?

    You said "the government needs to strike an excellent deal on behalf of taxpayers." But as currently constituted, the plan is for the secTreas to pay MORE for the bad loans than their worth. Don't you know that? How can you call that making an excellent deal for the taxpayer, even if we get equity?

    Here's what I think: you guys i.e. the motley fool, have far more to gain from a bailout than you do from a market crash. It's that simple. Same with Cramer on TheStreet and all the other Wall Street cheerleader who were wild free-marketers when the times were good. You see the possibility of a market crash as the equivalent of the death of the goose that laid the golden eggs.

  • Report this Comment On September 26, 2008, at 4:36 PM, spongeworthyusa wrote:

    I meant $7,000,000,000,000,000.00 .

  • Report this Comment On September 26, 2008, at 4:37 PM, kjston00 wrote:

    If these businesses are too big to fail then why did the Government let them, and continue to let them be so big?

    Can anyone channel Teddy Roosevelt?

  • Report this Comment On September 26, 2008, at 4:37 PM, FreeNachos wrote:

    One huge message I've always got from the Motley Fool is to avoid using credit and live within your means. Sure, a credit crisis would have far-reaching implications but maybe that is exactly the point, that the culture of spending money we don't actually have is inherently flawed and will ultimately fail like it should.

  • Report this Comment On September 26, 2008, at 4:46 PM, richardnogginn wrote:

    I've heard horror stories about the Great Depression from Grandparents, Great Uncles, etc. As children they used to pull a red wagon behind them and pick through the garbage of the well-to-do. Anything like a half-eaten potato went into the wagon. They would take steak bones and pound them so they suck out the marrow. Individual families had to move in with each other so there wasn't much room for privacy. Aunts, uncles, cousins, grandparents, pooled their money together so they could rented a house. When my grandfather lost his job at the tablet factory, he lost the home he was buying.

    I'm writing this to inform folks of the consequences of our government not acting. If you are single you will be homeless and hungry. You'll be a hobo.

    If you have a family you will have to watch your children or grandchildren starve. You will do your best to build them a tar paper and cardboard shack to live in, until you can one again afford a home.

  • Report this Comment On September 26, 2008, at 4:53 PM, richardnogginn wrote:

    I've heard horror stories about the Great Depression from Grandparents, Great Uncles, etc. As children they used to pull a red wagon behind them and pick through the garbage of the well-to-do. Anything like a half-eaten potato went into the wagon. They would take steak bones and pound them so they suck out the marrow. Individual families had to move in with each other so there wasn't much room for privacy. Aunts, uncles, cousins, grandparents, pooled their money together so they could rented a house. When my grandfather lost his job at the tablet factory, he lost the home he was buying.

    I'm writing this to inform folks of the consequences of our government not acting. If you are single you will be homeless and hungry. You'll be a hobo.

    If you have a family you will have to watch your children or grandchildren starve. You will do your best to build them a tar paper and cardboard shack to live in, until you can one again afford a home.

  • Report this Comment On September 26, 2008, at 5:03 PM, ferg6 wrote:

    Sorry, I still don't buy it. True, the Treasury has the money but that puts the people in the congressional bubble in charge. Obviously, they aren't qualified to organize lunch.

    So, when is this time down the road when they relinquish ownership and where does ownership pass then.

    We are in a depression or has everyone missed it.

    Please - a more cogent argument.

  • Report this Comment On September 26, 2008, at 5:06 PM, skat5 wrote:

    This bail out is betting the farm. The credibility of currency is on the line.

  • Report this Comment On September 26, 2008, at 5:06 PM, zirconx wrote:

    richardnogginn, I call BS on that. I have a ton of equity in my home, I have savings, and I have pretty much zero debit other than the house. I don't think I'll be living on the street.

  • Report this Comment On September 26, 2008, at 5:07 PM, DenimAdept wrote:

    We need, somehow, to reduce the reliance of companies and individuals on credit.

  • Report this Comment On September 26, 2008, at 5:08 PM, rv36116 wrote:

    richardnogginn,

    You need to address the issue of how it came to be that you still do not have the same fate as your grandparents/great uncles, etc...

    How long did they have to do that? And WHY did they have to do that? Do you really believe that more than 75% of the American public were "Homeless hobos" as you suggested some of us would become if this stimulus package passed...

    Think about this, when 9/11 happened, and the tech bubble burst, what happened to the markets?

    They went WAY down, didn't they? What happened next? Why some airline bailouts happened of course, and guess what?

    The market popped back up a year or two later and guess what happened to those industries that got loans? They're still doing crappy.

    Moral of the story, we MUST learn to live within our means and if that means putting off retirement because of this (for a year or two), then that's what must be done. If you know anything about economics, this is the process that will occur if the $700B bill is allowed to pass:

    1 - inflation

    2 - everyday goods and food go up in price

    3 - those who were scraping by and paying their mortgage are hamstrung by the rise in everyday goods and food

    4 - they default on their mortgage

    5 - the same crappy businesses that just got bailed out are going to need more bailout

    6 - the government bails them out again

    7 - return to step 1 and begin again.

    Please think about this and don't go off of a gut reaction on what horror stories there are coming from the great depression.

  • Report this Comment On September 26, 2008, at 5:10 PM, crbblair wrote:

    With all due respect and I really mean those words. The answer is NO! The sky was supposed to fall already and it hasn't. We don't need to bail these guys out; they need to pay the same way I did with my Fannie Mae preferreds. I took extra risk for more reward and lost. The "give me your dollars" crowd will tell you this bailout is necessary and it is too complicated to understand why... bull! This is simple. There will be pain and a there will be a lot of losers but then these "smart, smart people" will be out of the financial gene pool for good! The doomsayers are playing on our fear and they have you duped too. Don't ever think this can be structured so the "taxpayers" will get their money back. It will never happen. It will just go for more things the government shouldn't be doing with our money and we'll never see a penny.

    Wake up fools! NIX THIS DEAL!

    Best regards,

    Chris

  • Report this Comment On September 26, 2008, at 5:13 PM, rv36116 wrote:

    Oh, and by the way, I just joined here recently, and already, the writer of this article has me wondering where the logic is in the impractical article that was written here.

    Logic and free trade economics - they're not that hard to apply to this situation.

    We NEED the economy to flush itself out, and last time I checked, supply and demand will equal lower appartment or home rental prices for those that loose their home because they can not pay their home mortgage.

    Get with the program and quit spouting illogical political mantra's here.

  • Report this Comment On September 26, 2008, at 5:23 PM, tumachar wrote:

    Govt might just as well

    1. Nationalize banks

    2. Nationalize Insurance

    3. Nationalize Fannie/Fridie

    30 years after govt wrote a check for RTC corp, we come back again to same situation. And if govt intrevenes we will again be at same place (this time maybe sooner than 30 yrs). As we know its a solution that worked.

    This is nonsense. Just because the govt prints paper that says "Legal tender for all depts public or private", does not mean they are responsibe for all depts, public or private.

  • Report this Comment On September 26, 2008, at 5:28 PM, ExitGrindAt50 wrote:

    If you dig yourself a hole, you better be prepared to live in it for a while. I'm tired of paying for other people's irresponsibility. I recognize that not passing this bailout will result in complete market chaos. But maybe this is exactly what the markets need. Let's purge the market of all the idiots who made reckless decisions and are now begging for the responsible to save them. Bring on a depression - I'm ready for it.

  • Report this Comment On September 26, 2008, at 5:31 PM, neirbotm wrote:

    Unfortunately the credit situation is the result of the desire of every part of the financial sector to reap the rewards of the speculative housing boom. We seem to have lost our understanding of the term "speculation". The subprime loans were made to further the speculative bubble's existence. This was not real money, it was imaginary money. The incomes required to pay the subprime loans did not exist. The inevitability of our current situation was completely ignored by every expert who should have been raising flags of caution. I like most other Americans stand to take a painful hit should this house of cards be allowed to fall. However, if it is not allowed to fall, we are only prolonging the inevitable.

  • Report this Comment On September 26, 2008, at 5:39 PM, jsl4980 wrote:

    You have got to be kidding me... The runaway inflation created by artificially low interest rates and out of control deficit spending will destroy the value of the dollar.

    Bailing out banks will cause incredible moral hazard. Why not take risks when the government will just bail you out?

    No bailout will be big enough when there is no backing for the money they print. 6 months from now they will need another one and another, then more funding for the wars...

  • Report this Comment On September 26, 2008, at 5:45 PM, interperk wrote:

    I also vote with the no deal crowd. This feels like the invade Iraq argument of a mushroom cloud happening unless we invade.

    This is a situation where very rich people are going to loose a lot of money because they played it too risky. They have friends in high government places. They would rather be rescued than loose the money.

    And doesn't it smack of complete hypocrisy that these same guys wanted no government involvement, and in some ways were anti-government, until they thought they might loose some of that rich lifestyle.

    Locking up the credit market and having these businesses fail might just be the ticket to a stronger America going forward. We will survive.

  • Report this Comment On September 26, 2008, at 6:01 PM, richardnogginn wrote:

    I don't need to argue, because it doesn't affect me very much either way it goes. My home is paid for, the car and tractor are paid for, I raise my own food, and I use wood for heat in the winter. I'll miss not being able to use the computer or TV if electricity goes out, but that happens every so often anyway.

    I just wanted folks to know what will happen if this does turn out to be the great depression part II.

  • Report this Comment On September 26, 2008, at 6:07 PM, DemonDoug wrote:

    Just remember: The people who are selling this bailout are also the people who sold us the Iraq War.

    I wasn't buying then, and I'm not buying now.

    "Our position on this is governed by three overriding principles:

    1. That letting massive portions of our financial sector fail would have enormous negative effects across our economy.

    2. That although we'd prefer a free-market solution, the U.S. government is the only entity with resources sufficient to make a significant impact.

    3. That government intervention must protect the interests of the American taxpayer."

    And on top of your buying the bailout, you have three principles that have no basis in reality. I will shoot them down one at a time:

    1. There are many banks that did not participate in overleveraging, and there is enough capital and money out there for well-run banks and financial institutions to profit from companies who are bankrupt, and when I say bankrupt i mean financially, morally, and legally. There is no evidence that a financial meltdown would take down the entire system, and I dare you to prove me otherwise.

    2. The assumption is that the US government can make a positive impact on the credit markets. This is false. Real Estate and toxic mortgages will continue to falter, although there will be a temporary floor, and the cost of this floor will be even higher inflation than we have now.

    3. The government intervened in 1998, 1999, 2000, 2001. Those interventions protected wall street bigwigs, and average taxpayers have gotten the shaft, especially since 2001.

    I urge the motley fool staff to reconsider this highly flawed line of thinking, and for all Foolish readers to rise up against this terrible, awful, horrendously flawed proposal.

  • Report this Comment On September 26, 2008, at 6:09 PM, ragerman wrote:

    My wife and I having been fiscally responsible most of our lives, we have a paid off modest house, vehicles, and some savings. I will feel betrayed by our representatives and government officials if they "bail out" the folks who acted in an irresponsible, greedy, and reckless manner, meanwhile foisting the trash heap of their making onto me, my children and grandchildren to pay for. I had hoped to retire and have a comfortable, if modest, retirement however if this "package" is approved I can see that inflation, shortages, etc. will ruin that prospect. There is going to be pain no matter what happens, like an operation to get rid of cancer, once the healing is over we could be back in some sembalance of good health. I say let the markets sort this out, that is what all the "free market" pundits have been saying for years, now is the time for them to put their plan to work, instead of cannabalistic capitalism when we are on the upswing and socialize the debts when we are in a decline.

  • Report this Comment On September 26, 2008, at 6:10 PM, ferfer wrote:

    Investment brokers/traders and any one in the finance industry has a vested interest in a bailout. It's how they make a living. All of a sudden their livilihoods are at risk. Ordinary folksa re being asked to bail them out. But it isn't a one way street. I tend to think that the economy will go into a recession regardless of the $700 billion or $250 billion or something in between. The question si, who will get that $700 billion. Where's it going to go? Does it filter or trickle boack into main street? Or does it head overseas to pay off China, Dubai, Japan and Europe who hold our debt? Does that money then float back over in terms of cheap U.S. commodities like wheat, corn, ag machinery, etc? Inevitably the U.S. dollar will break through current levels with other major currencies. I think either way, American taxpayers as always will get stuck with the bill. Whether it be an unnecessary war in Iraq or avarice on Wall Street, the bill will land at the feet of the taxpayer.

  • Report this Comment On September 26, 2008, at 6:14 PM, robdulaney wrote:

    I appreciate your note.

    I agree! We need to hold our nose and support this plan!!!

    Over the past week I have done research into the underlying fundamentals of this crisis and it IS as bad as they say. Inaction, gimmicks, or half measure are not an option.

    This type of crises has happened in many other countries throughout history. The fed has studied these crises and various possible responses. The proposal has the most sound economic support. It must be done quickly. The cost of inaction would be far worse for taxpayers and the future of our nation.

  • Report this Comment On September 26, 2008, at 6:32 PM, nestegg4324 wrote:

    Is this coming from the same people that said the recession would work itself out just a few articles ago?WTF is wrong with you guys... Stick to your guns the market will work itself out it always does. For once our governement needs to do something it hasn't done in quite a while "NOTHING". They made there beds now let them lie in it. When Americans are in debt and cant afford to pay there own bills I dont see the Federal government jumping to there AID. But yet when a bunch of banks and investments companies live above there means they get free money, must be nice! Most of us have to file for bankruptcy! Lose our house etc. These guys get huge salaries, tell them to put some of that up start another companies and raise there own capital the old fashion American way "hard work". If I couldnt afford to pay for my house they wouldnt cut me a break you think banks would give any of us an slack yet alone let us miss a payment? I mean come on its obvious. We should be allowed to have cheaper houses and apartments which is exactly what will happen. They'll have so much excess inventory Americans wont even need a loan to buy a house they could just buy it cash the way it should be. But banks have done such a great job into convincing us all that we need to borrow money from the when the truth is we dont ! at all we can do it all on our own! How our grand parents did it thru the great depression when a house was a couple thousand if that. The market will not just die over night as much money as we have invested. The governement should take a couple of billion and use it to give new business owners small business loans instead of leading it to dying companies concentrate on creating new thriving companies who reak of success, instead of leading a leg to a dying horse and getting stuck with the funeral costs on top of that.

    Leave it alone thats my opinion concentrate on taking the neccessary precautions to ensure the future of our economy!

  • Report this Comment On September 26, 2008, at 6:36 PM, UH2L wrote:

    It's ironic that due to the lack of regulation of the banking/financial industry, we now need to institute mega-regulation and resort to government control of certain important financial entities. It's just proof that the free market doesn't work without oversight! If it did work, we wouldn't be in this mess. Corporate greed went amok and societal greed didn't help matters any. This is another downside of the government allowing companies to merge until they are each too important and large to allow to fail. Competition and diversity must be protected, but it seems like the Republicans like to support their big business buddies as they build their empires. Oh, and what ever happened to the Republican idea of privatizing Social Security??? They were wrong on that one too.

    As for the bill not passing, people can complain that we shouldn't have to do it for moral reasons. But we can't go back in time and the question is what should we do at this point in time to avert a financial catastrophe. Not providing government support might cause much more harm than just delaying the inevitable. Can any of you prove otherwise? I can't prove either way, but I'm not sure I want to risk it.

    If people stop getting paychecks because their employers can't borrow money, we'll have near anarchy on our hands.

    My motto is this, "Corporations have much more capacity to do harm than individuals do." This is why I don't vote for Republicans who value corporate freedom over personal freedom.

    UH2L

    http://www.thingsivenoticed.com

  • Report this Comment On September 26, 2008, at 6:43 PM, richardnogginn wrote:

    If this happened in China, they would take the Finance Minister out and shoot him on live TV. That way the next few Ministers make sure they don't screw up.

    We might not want to shoot these managers, but we sure could send a message to Congress that we want these guys tried for Sedition or treason or something. Isn't treason where a person puts his country and countrymen at risk for his own gain?

    I also think that the guys making the original request just might know a few things that the rest of the country is ignorant to.

  • Report this Comment On September 26, 2008, at 6:45 PM, jack21222 wrote:

    After days of research, I still haven't been able to form an informed, cohesive opinion on this bailout. While it would be nice if the government can work out as sweet of a deal as Buffett did, I don't trust congress enough to pull that off. I certainly oppose a blank check. However, people say there will be another depression if nothing is done.

    I simply lack the knowledge and insight to make an informed opinion. It is frustrating.

  • Report this Comment On September 26, 2008, at 6:52 PM, yankeedollar wrote:

    I'm with the Fools who have posted above. The proposed bailout offers every American an appalling disincentive to act in a fiscally responsible and honest fashion. Every responsible banker, shareholder, and consumer is now facing the question: Why go through the considerable effort of handling money and credit with prudence when the most likely foreseeable outcome of labors is that you will be involuntarily saddled with the enormous financial burdens abandoned the irresponsible and the dishonest?

  • Report this Comment On September 26, 2008, at 6:52 PM, tennischica wrote:

    I say let 'em fail. If you work for a company that can't meet payroll and has to borrow, you should have looked for a new job a long time ago. As a small business owner, I have always looked out for my employees and one of the ways I do that is never to get into over my head debt. I have never grown too fast, never bought equipment that I couldn't pay cash for and still I've still managed to grow my business 10-20% a year for the past 10 years! Borrowing money to live on is bad news folks; If you don't have enough cash to cover even basic business expenses, then your business is in trouble. And if you wanted a house that you couldn't afford, then you should lose it and go back to renting. And listen up Dems and Repubs, all the senators and congressmen who are on the take with special interests ought to be recalled. We ought to clean house entirely. That Raines and Johnson and now Fishman from WaMu skate away with millions...after their companies failed. Utter nonsense. This is theft and these idiots in office are in bed with these guys. Chris Dodd need to go!

  • Report this Comment On September 26, 2008, at 6:57 PM, genomega1 wrote:

    The short-term credit market has completely collapsed.

    The Federal Reserve has lost control of the money supply. No matter how much liquidity the Fed pumps into the system, banks are still unwilling to lend to one another. Many financial institutions are shutting down existing lines of credit to otherwise healthy businesses. Main St will also be affected as banks make it more expensive to get mortgages and car loans. Banks will not offer home equity lines of credit, and they will begin to demand payment on the lines they have outstanding. Families that borrowed off their home thinking they could pay it back over a span of years will be forced to come up with the cash immediately.

    There are many problems with this attitude; number one, many people will not get their paychecks. It is a common practice to take out short term, low rate loans to meet payroll expenses. Vendors will not be paid for the same reason.

  • Report this Comment On September 26, 2008, at 7:06 PM, MooBaby17 wrote:

    I am standing with those who believe that this bailout proposal and "supporting arguments" being propagated by various writers for the Motley Fool, and now its president, are flawed. The first point is IF the reliability of our markets is undermined? IF? What does anyone at the Fool think is happening right now within our own borders and on a global scale?? Our markets are already undermined without further action by the Treasury or anyone else! Most of us in this room were taught that there will be repercussions for our actions and decisions; that's a fact of life. So how could so many on Wall Street and in positions of power in this country have missed such a critical life lesson? They didn't... they ignored it!!! I sense a swelling of outrage of such proportions in this country as I have never known before in my 54 years of life. How dare these irresponsible power brokers behave as if they have some right to take what we have spent our lives to earn honestly! No, no, no and again NO! They can all feel what it is like to lose their jobs, give up their corner office suites, their McMansions, personal drivers and tee times and have a huge portion of humble pie catered for lunch for once in their selfish, fraudulant lives. The esteem for these type of people was long ago lost because of they way they treat others and conduct their lives, and now few have faith in anyone or our long-established institutions anymore. They have been living the high-life off the backs of the masses for far too long, never truly caring about the shareholder (their employer!) or the taxpayer, and now they expect us to just provide them with a soft landing based on their heinous actions and disregard for anything but their own fat paycheck? They expect us to believe that their "bailout fix" is for our good??? Puhleeze! They wouldn't recognize an altruistic response to anyone if it stood up and sang the Star Spangled Banner! I DON'T THINK SO!

  • Report this Comment On September 26, 2008, at 7:12 PM, MarcoPalo wrote:

    There are just too many brilliant economists who say that the administration's cure is worse than the disease and we should make the market clean it up with some insurance backing from the govt. There is no problem of liquidity, on a problem of confidence. And the result of rapid or hyper-inflation seems to be something that most assume will happen. Plus, we're giving GM something like a $70 billion loan. we can't keep this up. We still have our needless wars and environmental problems to pay for.

  • Report this Comment On September 26, 2008, at 7:14 PM, rkfoster wrote:

    The main point here seems to go unmentioned wherever I read or listen/watch the news. That point is simple, why have "sub-prime" mortgages not been paid? Why are homeowners defaulting on their mortgages? The fact is that the average so-called "middle-class" is no longer making the kind of income that supports home ownership. This is no longer due to people speculating on property values, these are real people losing their real homes! The average citizen of the US is the one that needs a "bailout", although they would much prefer a job or a better paying job. Businesses in the US that have no social conscience to put the lives of their workers ahead of the bottom line are the ones that precipitated these bad assets.

    I'm afraid this bailout of financial businesses will be necessary or there will just be more companies laying off people and creating the same vicious circle. Commerce will need to continue so that even more of those average homeowner citizens don't end up not being able to pay their mortgages. The average citizen is not a Motley Fool when it comes to protecting their wealth.

  • Report this Comment On September 26, 2008, at 7:18 PM, JesseCornel wrote:

    It is obvious to most that when you arteries are clogged, the blood doesn't flow. When you have blocked arteries it is an emergency, and to avoid a heart attack it is critical to get the blood flowing, which implies the use of a stent or open heart surgery. A complete blockage will result in a heart attack or worse. Time is critical, and the required correction is an emergency.

    Analogous to your vascular system, the financial markets are the arteries of the economy. Analogous to your arteries, when the financial markets are frozen, the monetary supply does not flow. This creates an emergency situation where it is imperative that we restore the monetary flow.

    In today's environment it is critical that we on an emergency basis thaw the financial markets thereby enabling the required monetary flow. There is not a lot of time to react. Waiting too long will create a severe recession or a depression.

  • Report this Comment On September 26, 2008, at 7:28 PM, NoBailout wrote:

    The bailout is NOT good for the taxpayer. Surely there are better ways to fix this problem. How many problems has Wall Street created in the last 100 years? I vote for extreme regulation of financial markets so these boneheaded financiers don't completely screw up our country! Also, abolish the Fed. That is all.

  • Report this Comment On September 26, 2008, at 7:29 PM, AmbroseSnit wrote:

    Since we are so worried about this "crisis" I may just have the solution. how about we take 100 billion and divide that into the 200 million adults and let let pay off their mortages. Then gov't could get its 25% from it. All the banks would get their asset books covered and cleared. We then could use the remaining "thin air" money to buy a car which would save our auto industry. I know inflation but at least this would actually benefit all of us instead of the select few. You work out the details and get back to me. Such oversimplifing I know. If they are going to do it why not put it in our hands so we can only blame ourselves for letting this get to this stage in the first place. Zimbabwe hear we come.

  • Report this Comment On September 26, 2008, at 7:33 PM, timali1711 wrote:

    A lot of us are angered by the need for this "bailout" even though it is needed. It would be a much easier sell if in addition to the bailout, there was 1) An announcement of legislation that WILL be passed this year to keep this from happening again. Not the meaningless type of legislation that came out of the collapse of Enron and such, but stuff that really works. 2) A few arrest warrants issued for upper management and board members of these companies that did all this. The FBI has been looking at these companies for months. They may not have a tight case for conviction yet, but you can bet they have probable cause on many people. That's enough for an arrest warrant. 3) Congress should pass the consumer credit card protection (H.R. 5244) legislation that is currently pending. This bill will help out all of us by ensuring that things like double cycle billing are prohibited, credit card companies have to apply payments to higher interest rates before lower (promotional) interest rates, among other great consumer protections. This would really go a long way to restoring consumer confidence that our elected officials really do care (right). That's my rant. Only the bail out will happen and in 15-20 years, we'll do it all over again.

  • Report this Comment On September 26, 2008, at 7:33 PM, feliz1000 wrote:

    If that is the Motley Fool stand, I am doing business with the wrong organization. Seems like your article is based on self-interest. Of course there may be fallout but that's the price we pay for speculating.

  • Report this Comment On September 26, 2008, at 7:35 PM, Indefatigable69 wrote:

    I am stunned not only by the proposal but also the position of 'the fools'. Please have more faith and confidence in our way of life, our country, our people, and our economy. Not since FDR has such potential damage been proposed and seriously considered by the congress and the chief executive.

    By the way, this is not about "bad" mortgages (running about 6% - very managable): this is entirely about gross over leveraging by investment banks, hedge funds, and others. Those are the entities who will be saved by this bailout.

    It may be too late, but I will continue to contact my representative and senators and I hope you will contact yours as well.

    Lastly, I hope the fools reconsider. Take it from some of us who've been around awhile, it's not as bad as it seems.

  • Report this Comment On September 26, 2008, at 7:36 PM, UniqueMiner wrote:

    You guys are nuts. I am not supporting the republican bailout. I will pull out my investments first thing Monday morning and watch your rich fat asses slide down the greased slope to hell. I could care less what dire straits you prophesy. Who are you? Where the hell is Dave? He doesn't support propping up this mess does he? What happened to all the talk about staying calm? You led me to believe you had some insight. What a letdown. This letter to us is your only measure to capitalize on this market? What about buying companies at bargain prices? Didn't the Oracle of Omaha just pick up a multi-million dollar company for pennies? Why aren't you guys talking about capitalizing on all these fears like he is? This economy will go down because Bush drove it in the ground, but that happened months ago, right? Aren't you guys ahead of the curve? These days I wait for Obama about as much as I wait for Jesus. I will make a prediction you people should have seen long ago. Obama, the current leader of any Democratic Party decision right now, will instruct everyone to vote against any bailout because the economy being in the ditch ensures his election. I am sorry for disrespecting you guys who have helped me so much, but please. Go back to community college and take a political science class to learn more about who controls the markets in this country. We do. The American people. This year we are voting for a change. Predictions: You can still get 40% out of the coming six months. Sell anything you have invested in Asia. Buy stocks like NXG and NILE until election is over. Then buy EBAY, GOOG, ATVI, INTC, and HPQ like it was the old days and ride this thing out. What's next after that? Genetics. See a trend?

  • Report this Comment On September 26, 2008, at 7:48 PM, skyelobar wrote:

    Let them Burn! Let them all burn!!

  • Report this Comment On September 26, 2008, at 7:57 PM, lstanley9175 wrote:

    I'm also a vote NO person. I understand the enormity of the problem and the implications. Yes, it will be bad, very bad. Shame on Wall Street and everyone else bound up in creating this mess. At the risk of sounding like Sour Grapes Sally, I used to be a small business co-owner that went belly up back in the 80s. Guess what? No one bailed us out. We went flat broke and lost everything. That was an incredibly hard lesson for all concerned but it taught me the value of living within my means and the importance of living with a realistic budget. Credit is a beautiful thing when it's not abused. And if you (or banks, corporations, etc.) choose to abuse it, then suffer the consequences. We will all share in the pain one way or another anyway. If I had any trust or confidence in those trying to come up with a bailout package now, I would reconsider my opinions. But I don't. After what's happened, why should I?

  • Report this Comment On September 26, 2008, at 8:00 PM, RevCBH wrote:

    Hear hear! I'm extremely heartened to see the tremendous opposition to this plan both online and among the population in general. This is certainly not the correct action and the people know it.

    The mess we're in is a RESULT of government policy ever since the creation of the Federal Reserve. The ONLY way to prevent these sorts of bubbles are to live within our means as a nation (specifically in the way we run government) and to restore a sound monetary system based on gold and silver.

    Save the economy, respect the constitution, restore the republic!

  • Report this Comment On September 26, 2008, at 8:01 PM, pmbarrett wrote:

    I never thought I'd see the day that MF would take a position that supports out right Socialism. There is no good reason to support this "payback" to this group of Robber Barons.

    The fact of the matter is that years ago (1977) our incompetent legislative rubes made a deal with the devil to increase home ownership in our country. The rubes said they would provide the money (Fanny/Freddie) if the banks would look the other way when reviewing credit requirements. Well the irresponsible got their homes according to plan, and all the rubes patted each other on the back for a job well done. But a funny thing happened, the irresponsible did the irresponsible thing and bite off more than they could chew. They didn't pay, so now the responsible members of our society have to once again pay for the irresponsible. And, the rubes, being the mental midgets that they are, don't understand why the responsible folks are flat pi$$ed off.

    This bailout is not just a Wall Street bailout, it is a bailout of the incompetent rubes we call politicians. Our elected officials! We put them into office and now it is time to removed everyone that goes along with this scheme. Also, every person that participated in this mess should be drug out and prosecuted to the furthest extent of the law. From bank CEO's to lying politicians to irresponsible home owners. No one should escape the wrath of the responsible. When the public sees our laws enforced, then maybe we can consider bailing out those that actually need it. As now proposed, we are simply covering for our moronic elected officials.

    It's time to serve notice to our elected officials that they better stop writing checks with their mouth that their a$$ can't cover!

  • Report this Comment On September 26, 2008, at 8:06 PM, paddingtongreen wrote:

    Sorry guys, the sewer is blocked, the crap is backing up into YOUR bathroom and you are refusing to cleanup on principle, you're not the one who caused the blockage!

    How bad does the smell have to get.

    There is a run on the banks, they have no money to lend, employers can't borrow so they can't make payroll till they get the recipts of business, you can't pay your CC bill, and on, and on. Banks lay-off, your employer lays off and you have a depression.

  • Report this Comment On September 26, 2008, at 8:07 PM, TradingForWealth wrote:

    Contrary to what the politicians might think, some of us have prepared and will survive when the system crashes and burns. Some of us have seen this coming for years and warned deaf ears of the problems now clearly visable.

    This bailout, or rescue if you prefer, is just a postponement of the inevitable. I keep hearing people state; Uncle Sam is the only entity with the funds to do it. My mama tought me; as long as you owe someone something you own nothing. This country is broke. Our financial system operates with smoke and mirrors and now the wind is blowing the smoke aside and tipping over the mirrors.

    If we as a country are ever going to recover we're gonna have to feel some pain and learn the lessons our forefathers did. Yup there might be food lines and more homeless people but maybe my kids will appreciate the roof over their heads and the food on the table instead of whining about how the neighbor has xbox 360 and we don't! Good luck everyone

  • Report this Comment On September 26, 2008, at 8:11 PM, Richard233 wrote:

    I'm not sure what action is really needed.

    I know that what is going on is causing ripples in the economy, I also know that if enough banks fail the FDIC does not have the money to cover it, at least in the short term. So, if these organizations really need to exist, then nationalize them (the stock becomes worthless) fire the top management and boards who let this crap happen (no parachutes or the like), let the stock holders sue the board to recover their money from the bonuses and the like, clean up the balance sheets, pay off the loans based on ACTUAL value, not the inflated fake values of the last 8 years. Set up a system to sell of the assets at a reasonable pace on an open market. Pay back the tax payer plus a reasonable return (double treasury rates) and give the remaining amounts (if any) to the stock holders. Oh, and make any lobbying for these types of firms forbidden. If caught, we throw you in a dark hole never to come out again.

  • Report this Comment On September 26, 2008, at 8:23 PM, NoMoreBailouts wrote:

    No bailout.

    194 top economists in the US signed an open letter to Congress stating this bailout would do more harm than good.

    You can read about it at bloomberg news, just type in "bailout".

    We have two people, Hank Paulson and Ben Bernake that are trying to sell us this plan using fear. All of us are relying on the advise of just two people. These are the same two people who have been questioned at regular intervals over the past two years about the state of the economy. Bernake said the sub-prime fiasco would be contained and not spread throughout the rest of the economy. Both have also said the economy was fine as recenlty as a month ago. Now, all of a sudden, there's a mad rush that we need to commit to 700 billion dollars in a matter of days or else we're going off a cliff.

    Not convienced at all. In fact I have major doubts. Given the gravity of the situation, at a minum we should get a second opinion.

    I have a bank account at WaMu. This morning, (Friday) I went to the bank at 9:15 am and the doors were open and the new JPMorganChase/WaMu was ready for business. I asked if they were making loans. "Absolutly" was the response.

    Gee, credit is tighter than it was three years ago. So what? Is documenting your income and demonstrating that you can pay a loan back unreasonable?

    Some of us remember the tough credit era of the early 80's when first mortgages were 17% and car loans were 22%. We endured and made it through. We were getting rid of the inflation caused by the weak Fed policies similar to the Bernake Fed.

  • Report this Comment On September 26, 2008, at 8:31 PM, CallmeKevin wrote:

    "It's ironic that due to the lack of regulation of the banking/financial industry, we now need to institute mega-regulation and resort to government control of certain important financial entities. It's just proof that the free market doesn't work without oversight!"

    Lack of regulation? What planet are you living on? The institutions struggling the most are among the most regulated in the industry.

    Free market? That's funny. If there were a free market, almost no one would have made loans to people who couldn't afford them. If there were a free market, Fannie and Freddie wouldn't even exist. Regulations put these anti-free market institutions in existence in the first place.

    Lack of regulation indeed, lol.

    And now we have the same people who gave us this problem coming up with the fix. :o You have to be kidding me. Next they'll be telling us if we don't fix this, planes will start dropping out of the sky, and CO2 will kill us all.

  • Report this Comment On September 26, 2008, at 8:39 PM, ONEBIZTIGER wrote:

    Sorry Foolish Brothers and Associates!

    This bailout wreaks. It's time for the chips to fall where they may. Survival of the fittest, and all that jazz.

    Why should we bail out commission-hungry bankers and investors who were thinking of their own bottom line?

    When is enough -- enough?????

  • Report this Comment On September 26, 2008, at 8:43 PM, rse0506 wrote:

    I don't understand enough details of the so-called "bailout" (does anybody?) to prognosticate on the consequences of doing or not doing it. But I want to offer some "fundamentally oriented" thoughts:

    There are two major things that need to happen, indeed have been happening, in our economy and our financial system:

    1. Deleveraging, ie. paying down debt and getting our overall "equity ratios" higher.

    2. "asset rationalization", which just means that overvalued asset classes (esp real estate) must devalue (or revalue) until they are in balance with other kinds of assets.

    The issue at hand is not WHETHER that will happen, but HOW and WHEN it will happen. There is no sense trying to prop up overinflated assets, that will just make it worse. BUT! "Just letting the markets take care of it" is very likely to lead to asset values dramatically undershooting their true values and then returning to some sort of normalcy later. It's the difference between an orderly movement toward debt unwinding and asset rationalization, and a disorderly one where things yo-yo around, with speculative panics on the downside to complement the speculation we've already had on the upside, and then more speculative "melt-ups" from the lows.

    The problem with the latter scenario is that those deep lows of dramatic undervaluation could be INCREDIBLY DESTRUCTIVE. At these lows, it will be not just the greedy and irresponsible who are wiped out. People who have tried to prudently use and manage debt will also be wiped out. Every financial institution consists of a balance sheet of considerable liabilities and assets, BY DESIGN (that's what it means to be a financial institution). Their assets are somebody else's liabilities. As others have pointed out, not all, in fact not even most, of those assets (which reflect others' liabilities) were taken on, entered into, whatever, in an irresponsible manner. Rather, they came about as part of the ordinary functioning of the financial system. That's what it MEANS to have a financial system: one person's liabilities are someone else's (financial) assets.

    To simply allow it to all melt down will result in the wipeout of many, many responsible lenders and borrowers. They will have to sell at the bottom (that low-point of the yo-yo bottom), when in fact the assets they are forced to dispose of have a higher intrinsic worth. Productivity could take a phenomenal hit. And ultimately it is ONLY productivity that will get us through this and allow us to recover. Productivity is what ultimately supports the value of all economic assets.

    Those who have cash or hard assets, seeing this coming, will naturally hold off on buying until they are convinced that they will not also suffer more losses when they buy. This will exaggerate the yo-yo low, wiping out more innocent people. Whereas if they perceive that the rationalization and debt unwind is happening in an orderly fashion, they will reenter the market sooner.

    ONLY the re-emergence of buyers will stop the declines (in any asset class), but the point at which they step back in is highly dependent on whether they perceive an orderly rationalization or a freefall ending in a horrible crash.

    Characteristics of an orderly rationalization would be things like most people staying in their homes and continuing to work in their jobs. No huge loss of productivity. No big drop in the value of the NON-overinflated assets - in fact the value of those assets could even rise (relative to the overinflated ones, they will rise anyway).

    Could it happen this way? Those who support the intervention think it may be possible.

    It is not a proper role for the govt to try to peg or set the eventual values of various assets. That's the market's job. However, I believe that it is a proper and good function of government to do what it can to dampen the wild, and destructive, swings that are likely happen in the do-nothing, just "let 'er squeal" approach to the necessary debt unwinding and asset rationalization.

    With ALL that said, I don't know enough about the floated proposal to be able to judge how well it will work. I DO think the criteria that Motley Fool senior staff have laid out are very important, however. Therefore I support their three principles.

    Scott

  • Report this Comment On September 26, 2008, at 8:43 PM, aamire wrote:

    Out of the frying pan

    into the fire?

    If there's no bailout, credit dries up and we fail to function. If there is one, we print more money, create inflation, promote indulgent financial institutions, cripple economy even more in some time,... bust!

    Heads we lose, tail we lose?

    Not really. My choice between the devil and the deep blue sea is to support the capital markets for now and buy time to analyze the course much more deeply. I am confident we could exhaustively analyze the consequences and options and come up with a better decision if we buy time now with the bailout package.

  • Report this Comment On September 26, 2008, at 8:46 PM, rbsd wrote:

    What's to stop the creative geniuses who drove the economy into the ground from simply taking the $700B and digging a deeper economic hole? Why reward bad behavior? Revive the concept of debtors prison and put those creative geniuses into it along with the administration officials who stayed asleep at the switch while the crisis developed. Let them out after the economy recovers -- plus an additional 24.9% days of late fees, interest, and penalties.

    Those bastards wouldn't even think of giving an ordinary citizen a break if the citizen were in trouble. Rather, they would heap on penalties. Let them rot in hell.

  • Report this Comment On September 26, 2008, at 8:49 PM, jescarigle wrote:

    More foreclosured homes, means less Property Taxes collected by local governments, thus.... the taxes of the non-foreclosured properties, have to be doubled in order to cover the Local Government (City and Towns) approved Budget needs, thus.... the mortgage payment of those remaining owners, will considerable be increased (not by mortgage and Banking/Lending interest rate but by Real Estate Property Taxes) in order to cover for the non-being-paid by the foreclosured homeowners, and these, might join the trend of people unable to pay their mortgages, and thus.... even more foreclosure properties.

    Further more, local Homeowners Associations, will fall into the same situation [of above mentioned Townships], since foreclosured homeowners will not longer pay the Association Dues, and these must be passed over to the burden of the remaining homeowners properties, in order to cover their budgeted expenses, thus.... these will have their home expenses, increased and might be unable to cope with an thus, join the legion of foreclosed homes.

    And also to mention, that foreclosed properties, stop their electricity and water services, as well as maintenance of landscaping, and thus creating houses who built mold {due the closed not properly vented property}, damaged swimming pools, house overheated since there is no electricity to run a minimum air conditioning, or frozen since the is no electricity to run a minimum of heating, plus the grass and weeds growth without control, because there is no maintenance., and thus..... keep diminishing the market value of the area properties.

    If banking and lenders, do not stop their immensurable usury and freeze and change the terms of their mortgages and credit cards as outlined below, this situation will grow without control; thus, is not just to lend the lenders a $700 bn gift, but the affected consumers have to be the principal beneficiares of this handout.

    From: Jesus y Carmen Iglesias

    Sent: Thursday, September 25, 2008 17:12

    To: Jesus y/o Carmen Iglesias

    Subject: Fw: more of..... Too much on the line to rush Wall Street fix

    The usury of the Financial Institutions, not the people, are to be blamed for the way our economy is right now.

    Unbelievable!, have just received in today's mail, an offer from WA-MU (Washington Mutual) for a credit card up to a line of $30K, at....

    introductory rate 9.99%

    23.99% thereafter as well as cash advances

    default: prime rate PLUS 25.99% (actually 30.99%!!!!!!!!!!!)

    purchases prime rate plus 18.99%

    They must be out of their mind to offer these terms to a human being.

    $700,000,000,000,000.00 to save the banking and financial institutions, for going bankrupt and with it, the 401Ks, the retirement accounts, and the massive unemployment of these institutions employees, but it does not solve the problem of creditors still been unable to pay mortgages, loose their properties in foreclosure, and pay their credits at the highest interest and variable ("creative financing, it was called!) rates, thus in ahead time, we would have to -again- rescue these financial institutions with another $800 billions to save then from the -still- unable to collect from consumers and writing-off uncollectable accounts.

    As a condition for this humongous injection to the private sector, the interest rate on credit cards must be frozen and variables rates eliminated, and these changed to a maximum of 8% thus.... the institutions will still receiving a profit (not as much as before, but more than what the Fed's prime rate charges these), and people will be able to pay their credit cards.

    As all Real Estate properties had losen their values, up to a point where Equity Lines of Credits had been canceled, and therefore, properties owe a Mortgage Amount higher than the actual property market value, thus.... therefore, all mortgages must be reduced by 40% and all variable terms been converted to a 30 years straight interest rate, not higher than 7% (not as much as before, but more than what the Fed's prime rate charges these), and people will be able to pay their mortgages

    With these terms, the "thinking" CEO's will be unable to get millions dollars of severance, retirement, or performance bonuses plus high salary, stock options, expenses etc...., while their employees (the ones who really do the work) get minimum salary and stockholders, minimum (if any) dividends on stocks.

    Those charged-off adjustments or reduced amounts, of "uncollectable funds", must not been passed over to borrower-consumer with a followed up 1099-Misc tax form sent to borrower so that these must report them as gift income and therefore, taxable to the consumer-borrower, but, lender-financial institutions must right-ff these amounts on their Corporative of LLC's taxes, and these lesser incomes to the IRS, shall be part of the said Billionaire Bail Out.

    Hope these suggestions would be helpful to solve the crisis, from the point of view of a voter citizen.

  • Report this Comment On September 26, 2008, at 9:07 PM, tangotommy wrote:

    To get yourself out of a mess by printing more money seems to run counter to the fundamentals espoused by us fools. When money becomes nothing but numbers, we're in grave trouble. But, since money is already nothing but numbers, I guess we're already in a deep pool of cess. EXcess.

  • Report this Comment On September 26, 2008, at 9:10 PM, noneedforaname wrote:

    http://video.google.com/videoplay?docid=-594683847743189197

    I think more and more of us are becoming aware of the ploys of the hedgemony. It's an outrage how devious these families behave. They control most of the world's wealth (money, land, and resources), but will not stop until they have it all. This failure of the FIRE sector -- financial, insurance, real estate -- is part of the plan. Fortunately they have undermined the resilience, fortitude, and compassion of WE THE PEOPLE. This is the greatest time to be alive. Our decisions now will reverberate through time. Let us UNITE and minimalize the wealth of the deciduous hedgemony. They will pass away and a stronger and closer nation will emerge. One for the people and by the people. We will need a revolution based on love to get there. DO NOT PANIC; we can do it together.

  • Report this Comment On September 26, 2008, at 9:44 PM, gardnersf wrote:

    I have difficulties trusting anything coming from Secretary Paulson. He is a product of the very environment that got us into this mess. I do not support the bailout, at least on the scale that we are seeing it. I suspect that Secretary Paulson understands the financial markets very well, but lacks an understanding of driving a successful business that produces something. I suspect that an economic recovery can happen a lot quicker with modern technology than it did previously. If banks fail, then other institutions can spring up to fill the voids. Businesses must be allowed to fail and be rebuilt.

  • Report this Comment On September 26, 2008, at 10:15 PM, 922622cb wrote:

    Some people who made bad financial decisions will be hurt. That's our capitalistic system. It works.

    Some 401-K valuations may go down. They were unrealistic. If the government bails out the bad guys, what will go up is the national debt. The government will have to borrow money, and the government does not know how to make money in mortages, so I believe most of it will go down the drain. We will be passing the problem off to the next generation!

  • Report this Comment On September 26, 2008, at 10:21 PM, 1bigredviper wrote:

    google this new york times article. this crisis was predicted September 30, 1999

    Fannie Mae Eases Credit To Aid Mortgage Lending

    By STEVEN A. HOLMES

    In a move that could help increase home ownership rates among minorities and low-income consumers,

    the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks

    and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New

    York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose

    credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope

    to make it a nationwide program by next spring.

    Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure

    from the Clinton Administration to expand mortgage loans among low and moderate income people and

    felt pressure from stock holders to maintain its phenomenal growth in profits.

    In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help

    them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings

    and savings are not good enough to qualify for conventional loans, can only get loans from finance

    companies that charge much higher interest rates -- anywhere from three to four percentage points

    higher than conventional loans.

    ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down

    payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer.

    ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has

    required who have been relegated to paying significantly higher mortgage rates in the so-called

    subprime market.''

    Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent

    of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the

    conventional loan market.

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more

    risk, which may not pose any difficulties during flush economic times. But the government-subsidized

    corporation may run into trouble in an economic downturn, prompting a government rescue similar to

    that of the savings and loan industry in the 1980's.

    ''From the perspective of many people, including me, this is another thrift industry growing up around

    us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the

    government will have to step up and bail them out the way it stepped up and bailed out the thrift

    industry.''

    Page 1 of 2 Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times

    9/26/2008 http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF......

    Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate

    one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a

    rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on

    time for two years, the one percentage point premium is dropped.

    Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to

    consumers. Instead, it purchases loans that banks make on what is called the secondary market. By

    expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to

    people with less-than-stellar credit ratings.

    Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can

    qualify for a mortgage. But they add that the move is intended in part to increase the number of minority

    and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

    Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The

    number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998,

    according to Harvard University's Joint Center for Housing Studies. During that same period the number

    of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of

    Asian Americans by 46.3 per cent.

    In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per

    cent.

    Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in

    part because blacks and Hispanics in particular tend to have on average worse credit ratings.

    In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent

    of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income

    borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

    The change in policy also comes at the same time that HUD is investigating allegations of racial

    discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to

    determine the credit-worthiness of credit applicants.

    Copyright 2008 The New York Times Company Home Privacy Policy Search Corrections XML Help Con

    Page 2 of 2 Fannie Mae Eases Credit To Aid Mortgage Lending - New York Times

    9/26/2008 http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF......

  • Report this Comment On September 26, 2008, at 10:26 PM, pkassoc1 wrote:

    A lot of unsophisticated ordinary workers with families have held long term jobs and supported their children and have invested in retirement plans of various sorts to reduce the load upon their families when they get old. These retirement plans are managed by people that are judged by the company managers as to the perfomance of these funds. If the fund manager says he cant get as high a return on the investments that the next guy can because the next guy has riskier placements, then the manager will be replaced by somebody else that will succumb to the risk. So, like any working person, he will succumb to the demands of his job. The real problem occured as our leaders in washington accepted lobby cash to turn a blind eye to the secondary markets that were invented to game the system. This was fraud of the highest order with the government, financial entities, mortgage brokers and liar applicants etc. all involved. Many people from all walks of life partook in this scam and profited greatly from it.. However, we must not let envy cloud our reason. Many, many more people led ordinary lives and did not profit during this period from this bubble. It is not reasonable to plunge the entire world into a depression by allowing the system to collapse in an uncontrolled fashion. The consequence would be a very long and painful period with a this period inflicting much less pain to the finacially elite than to the rest of the population. There will be much clumsy management of the recovery and some efforts that will be counterproductive, but i feel that a more economical recovery will occur if we follow a proactive course.

  • Report this Comment On September 26, 2008, at 10:28 PM, wonderousdragon wrote:

    I believe that those in office have been arranging this new way of stealing the taxpayers money. They will probably siphon the funds from the social security fund.

    They really wanted everyone to have invested their social security funds into the stock market first, but I guess this will do.

    Everyone should know by now that anything the Bush administration does is overly suspect.

  • Report this Comment On September 26, 2008, at 10:33 PM, Bullstothewall wrote:

    NO SOCIALIST CORPORATE WELFARE 'BAIL OUT!'

    Don't be a fool, tell your congress person and senators to vote against this un-American bill or YOU and your kids will end up paying for it.

    Email your congress persons and tell them you don't want to pay to to bail out a bunch of Wall Street millionaires.

    http://www.congress.org/congressorg/directory/congdir.tt

  • Report this Comment On September 26, 2008, at 10:36 PM, 1bigredviper wrote:

    This is not a product of the Bush administration. This is a product of the Clinton administration. Offering loans to people who didn't qualify in an attempt to give low-income families a chance to own a home and now they cannot or will not pay because the value of the home is less than the mortgage. Corporate greed in an attempt to keep the earnings high has lead to this situation. It is not the responsibility of the US government, whether they can print the money or not (because we cannot afford it) to inject the cash into the society. Private equity exists for this reason. Businesses will merge, collapse or succeed. It is ridiculous to think that the finance industry will collapse as a whole. 94% of homeowners are paying their mortgage. Only 6% of the debt is bad debt (up from an average of 3% several years ago). If we wanted Nationalism we would live in Europe.

  • Report this Comment On September 26, 2008, at 10:37 PM, a1aman wrote:

    I agree with most, no blank check. I'll take my chances with time running out. Strike a deal where We the taxpayer can recover the investment down the road. Look at the CEO of Washington Mutual, over 40 million insalary last year to run the bank into the ground. Even if he never again runs a company the 40 million should allow him to suffer in luxury. With this bailout how many more like him?

  • Report this Comment On September 26, 2008, at 10:38 PM, flatrater1 wrote:

    as far as the bail out goes ; what should be done is first have the holders of the equities discount them 25% then a additional 50% .. keep fanni & freddi which started life as gov enities , use the income to reduce the federal debt ..

    also use fanni & freddi to lower instrest rates to 4.5% fixed for the next 3 to 5 years. ; after which they can be alowed to float at market rates....

    no severance pay or golden paraschutes for the ceo's which caused this mess ; in fact they should be made to work for free for the next 5 years to clean up their mess & pay back to the share holders the overage that they have been over paid for their incomptance.....

    what really needs to be done is get rid of all of the dirrivetives which are the under lying cause of this mess ; the so called

    securities /paper liens....

    reinstate the rules & regulations & over site of the markets that were in place before bush 1 started getting rid of then & bush 2 finished the job....

    or we could keep it kiss ; keep it simple

    keep it stipid.....

    the lenders / equities holders/ banks ; what ever you want to call then . could just write 25% of all exisiting loans (

    writwe them down ) take a loss on their taxes which they are going to do any how.... lower the loan rates to 4.5% on their own ... and clean up their own mess

    .....

    at the rate they are going with foreclosures ; reselling them at a loss on

    average of 30 to 50 % plus the cost of

    foreclosure another 10 to15 % ;you would think it would just be cheaper & easier to redo the loans ...

    but as most bakers have their head up their rear most of the time I don't

    expect them to think about this it would be too simple / stupid.....

    and I mean all the loans issued to every body in the last 4 years or so....

  • Report this Comment On September 26, 2008, at 10:58 PM, commonsense1won wrote:

    The ceo's who took 500 million golden parachutes from investors need to be federally investigated, indicted by a grand jury, sent to prison and disgouged off all thier ill gotten gain.

    THE GREEDY FILTHY RICH ARE AS DANGEROUS AS THE DESTITUTE, BOTH WILL DO ANYTHING TO GET MONEY.

    Tax the grotesque uber rich into middle class and give the homeless destitute a sro.

    people who are too rich and greedy are dangerous as they will do anything for money, can never get enough money and they are never satisfied. The destitute are dangerous as the filthy rich as they.they have nothing to lose and will do anything for money. destitute and filthy rich are both bad news dangerous and the field should be leveled. tax the filthy rich and give a sro to the destitute.

  • Report this Comment On September 26, 2008, at 11:02 PM, PaintItBlue wrote:

    I am deeply skeptical about this bailout. It feels like somebody is trying to shake us down.

    Up until last week they were telling us everything was going to be all right. Now they are just about telling us that civilization itself is circling the drain.

    Why is it that the big guys can get bailed out after letting greed take over and making loans that were unlikely to be paid back? Will anything be left to help public transit systems struggling with high fuel costs, railroads that have been given too little funding, airlines that are on the verge of going under, young people trying to finance a college education, school systems trying to educate our children, people trying to rebuild after the recent hurricanes - ANYTHING besides the bailout and the war? And why are we on the verge of giving them all this without better oversight?

  • Report this Comment On September 26, 2008, at 11:08 PM, bradylarry wrote:

    I really hope this is the last pro-bailout fearmongering article I see from the Fool. From a service that I subscribed to due to their support of free market capitalism, fundamental value investing, and "don't panic" philosphy, this has been very dissapointing.

  • Report this Comment On September 26, 2008, at 11:13 PM, bradylarry wrote:

    Furthermore, I WILL lose more money without a bailout. My company WILL be hurt due to higher interest rates (ours are all tied to prime). But, I believe I will be better in the long run and will lose less overall due to inflation without the bailout.

    Recommended reading: http://faculty.chicagogsb.edu/john.cochrane/research/Papers/...

    http://fiatch.com/post/51887605/ronpaulonthemeltdown

    http://fiatch.com/post/51663465/fanniesetupforthekill

    http://fiatch.com/post/51660083/fabernailsthefedasdrugdealer

  • Report this Comment On September 26, 2008, at 11:17 PM, bradylarry wrote:

    From the NYT 9/30/1999

    ”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

    ...

    Do we really want to trust the goverment to make better decisions than the market to solve this problem?

  • Report this Comment On September 26, 2008, at 11:21 PM, pythagoras99 wrote:

    I'm not a psychic, so I don't know if the collapse of mortgage-based securities would cause a collapse of the economy as a whole. I do know that it is a risk. And once again it comes down to the proper pricing of that risk. Is the taxpayer's purchase of $700B in questionable mortgaged-based securities a good price or a bad price for the amount of insurance that will provide against that risk? I wouldn't even know how to go about quantifying that. Fortunately, however, as I am not in Congress, and no one in Congress has so far called or emailed me for my advice, my inability to answer that question is of no importance whatsoever. *whew*

    However, there are a few things that I do know, in reference to a few things claimed here:

    * The limit on the proposed purchasing authority is $700 billion, not $700 trillion, not $7 quadrillion. Perhaps it would be easier to avoid these mistakes by using the word "billion" instead of trying to count out the nine zeros.

    * Those who are making political statements about the bailout seem to have their political parties confused. The group standing in the way of a bailout right now is the House Republicans.

    * Those who claim that this is a rescue of the bigwigs who caused the problems, have apparently not paid attention to the wave of firings of CEOs and executives in these banks.

    * "how about we take 100 billion and divide that into the 200 million adults and let let pay off their mortages...and then buy a car"

    $100 billion divided by 200 million is $500.

    * "There are just too many brilliant economists who say that the administration's cure is worse than the disease"

    There are not enough brilliant economists for there to be "too many brilliant economists" who say anything.

    * Even if you grow your own food, need no electricity, and own your property free and clear, don't fool yourself into thinking you are isolated from the economy. If you are subject to taxation, you cannot be isolated from the economy.

  • Report this Comment On September 26, 2008, at 11:34 PM, iamchongo wrote:

    So my company wants to acquire another company. Guess what, if the bailout doesn't happen it can't acquire the loan. You need a new car or your son wants to buy a house....guess what? Without the bailout they WONT BE ABLE TO GET THE LOAN. Then these sellers businesses go broke, now they are out of work and all of the employees are on the federal dole. Boy for being stock smart most of these folks just don't get the simple economics. If your made at the rich people then take them out! Don't re-elect them! Make your government enforce laws that are already there! Don't let them fire US attorneys that prosecute these fat cats....Its' OUR fault, WE are the majority, WE put money in peoples hands. Most you idiots are going to vote for the same party that got you into this mess. Then YOU deserve it. Guess what, I have more debt than assets. If I get laid off I will wait till YOU go to work or the store and TAKE what you have. Solution: DON'T let me get LAYED OFF by keeping my company from getting a loan they need to survive! WE are all responsible FOR each other....I think a Christian told me that once! Get the big picture you small minded people...

  • Report this Comment On September 26, 2008, at 11:35 PM, bowtiechris wrote:

    When I first read this article, I thought it was an April fool's joke. The only problen is that it's not April 1st. The Motley Fool has done a disservice to it's readers by taking this position. They have gotten caught up in the fear of the moment. The current proposal does not allow for the free markets to work out their excesses and greed. What makes anyone think that the people who allowed the institutions responsible for this situation, can now get it corrected.

    If this is the official stand of the Motley Fool, you have become today's Chicken Little running around the barnyard yelling "the sky is falling, the sky is falling!".

  • Report this Comment On September 26, 2008, at 11:36 PM, WilyInvestor wrote:

    How about no; I won't support this :). Let a free-market be a free-market. It's kind of like life; you do something fatal to yourself (knowingly or unknowingly), and you're pushing up daisies...period. If the fed is so omniscient about things including the so called "bail-out", then how in the world do we find the financial system in disarray? The entire financial system is too large for any single person or entity to understand, which is the exact reason we have a market. So, why not let our markets define the fair price that these illiquid asset should actually be selling for? Just my two-cents...

  • Report this Comment On September 26, 2008, at 11:37 PM, keddie1 wrote:

    Dear Motley Fool,

    I been frantically attempting to learn as much as possible about this crisis.

    Why don't we apply Benjamine Grahm / Motley Fool rules and truly examine the numbers.

    The only number that has been put on the Crisis is.... $700 Billion.....

    Every other component of the description of the crisis is stated in ... well... .somewhat intangible terms...

    However.... Pres George and now in your request to us fellow fools there is at least a list of the consequences of not doing something...

    Problem.... the consequences are not quantified....

    Can we please Quantify these items....

    Reason.... you and Benjomine G consistently teach that one has to do their homework when making an investment.... Further.... both Benjamine G and the Founding Fools teach that if you don't have time to do your homework.... then ... you probably shouldn't make the investment....

    Doesn't the same apply here....

    so....

    Let's go through the list....

    - Lower spending... isn't spending in a down swing anyway as part of the laws of supply and demand... people spending more on fuel and health so they have less to spend.... that's happening on its own (although driven by the cost of fuel) If we make this 700B investment how will spending change as compared to not make the 700B investment...

    - Recession.... again.. doesn't economic activity cycle between a high rate of activity and low rates of activity... Benjamine G points out that there is a pretty serious recession roughly every 30 years..... with minor ones every seven or so years.... that's normal... aren't we about do for one of the BIG ones.... so... if we make the 700B investment then by how much will the recession be abated or shifted out in time..... for that matter if we don't invest the 700B how deep will this recession be... a number....

    - devauled stock market ... how much devaluing ... a percentage....

    - 401K's will plummit..... by how much?

    - lay offs... I've been through a few of these.... what percentage of the workers be out of jobs?

    - foreclosures....yes the foreclosure rate is high... but not as high as in 1986, 87, and 88..... so how much lower with the foreclosure rate be if we make this 700B investment....

    - Banruptcies.... same question.... a number...

    - and ... what is our expected return if we make this investment... we should look at this from two sides... how much of the 700B are we likely to lose if the deal goes horribly wrong.... .how much could we expect to make above and beyond the 700B investment if things go right...

    What is the likelihood that things will go right...???

    A couple of observations...

    The FED has already make credit available to these banks... and they didn't take them up on it.... No one has explained that event .. in light of credit being available from the FED and there being no takers... no one has explained why the 700B will change things... ya ya .. we buy up the ill-liquid assets... hmmmmmmm..... but waht keeps them from creating more ill-liquid assets going forward....????

    I also liked the comment that its not mortgage defaults that are the problem... its LEVERAGING....

    Leveraging is a wonderful thing in an upswing.... its is a terribly leathal thing during a down turn.... depending on the degree of leveraging it doesn't take a very large down turn to slam dunk the largest of financial giants straight into the ground... if it is leveraging don't you have to unwhined the leveraging before the clog goes away......and does anyone know the degree of leveraging... if you don't then we really don't know the amount of investment needed to unwhined things...

    An interesting thing happened to our family.... we inherited 20% of my wife's mother's house... in florida..... a sink hole opened up under the house...

    If this happens to you... you have two choices...

    - Plug the sink hole...

    - Get rid of the house.. .that is knock it to the ground....

    My Brother-in-law decided to go with "Plug" the sink hole.... he spent all the insurance money on truck load after truck load of cemet not having any idea of the size of the sink whole....

    In the end all the money spent pouring cemet down a hole..... and in the end we got nothing for the house... when.. we could have elected to knock the down and split the insurance money between the family members...

    It was his awesome power (due to the way the will is written...) and his lack of taking the time to get information about the size of the hole .. that did us in.... My wife was out about $60,000 as a result....

    This situation feels the same to me... we may well be headed towards a cliff... and there may be inpending doom if we don't do something....

    But we have no specifications on the size of this beast.... nothing... just lots of vague statements.....

    so... before we do this... we need to know if ...

    - the hole is small enough that 700B will actually plug. it..... or...

    - if the hole is so big that 700B is just throwing cement down the whole...

    That reminds me... Aren't you guys into CEMET.....?

    Thanks.... and hope someone can help quantify this beast for us....

  • Report this Comment On September 26, 2008, at 11:43 PM, TMFPencils wrote:

    The fact that the Fool wants government intervention rather than looking at the signs the market is sending to us really sickens me. Bad debt needs to be handled by the market, not taxpayers. It is not government's duty to step in and bailout Wall Street. If there really is an opportunity in the banking/mortgage industry plenty of private investors will jump on the opportunity.

    Please, Fool, don't endorse these ridiculous interventionist policies that ignore the problem.

  • Report this Comment On September 26, 2008, at 11:54 PM, bill1745 wrote:

    I don't care if the whole financial sector goes down, you guys with it. We should start by executing a few mortgage bankers, hedge fund managers, and bank CEOs in Central Park, Grant Park and Pershing Square, followed by consfiscating all of their assets.

    In the 70s in was the Chrysler bailout, the 80s and early 90s was the S&L bailout and now this. I have had it with the greed and mismanagment that abounds and I want blood on the floor and heads to roll. PERIOD!!!

  • Report this Comment On September 26, 2008, at 11:57 PM, iamchongo wrote:

    Again its not about the bail-outs!!! Its about no one, not you, your children, the business you work for will not be able to get loans. I guess people here can read but the can't comprehend. It's not about your personal stories and how nobody bailed you out. Its about no one being able to get a loan big business or small business....who doesn't get this???

  • Report this Comment On September 26, 2008, at 11:58 PM, jameslotp wrote:

    I live in Malaysia and one of the reasons I invest in the US markets is your system of rewarding the right people and letting them thrive. This also mean punishing those who have done harm to the system and the cost of their mistakes not be borned by the public. In Malaysia, you still can see many of the tycoons who were responsible for the crisis of 1997 thriving either because their companies were rescued "in the interest of the country" or due to non-enforcement of laws by the goverment. This policy of "calming the storm" seemed harmless at that time but the consequences are still felt today.I hope this will not happen in the US. It is important to let unhealthy businesses die off rather than being put on a life support system.

  • Report this Comment On September 27, 2008, at 12:01 AM, ThreeEms wrote:

    Bottom line: if the Bushies are FOR it, I'm AGAINST it! It is the current administration's policies that have gotten us into this mess, and I absolutely do not trust them to make it better. I'm in agreement with many who have already posted: NO TO THE BAIL-OUT, for all the reasons already cited. I must live within my means, and except during lengthy periods of unwelcome unemployment, I have done so all my adult life. As a single mom, I have considerable equity in the home I purchased 20 years ago, and I have repaid almost all the debt I acquired while unemployed and will complete that within just a few months. (I will not be homeless or jobless if this bail-out doesn't happen!) That has meant scrimping and foregoing many conveniences as well as luxuries, and it also means postponing my retirement until I can receive the maximum benefit. Having pretty much wiped out my savings while "between jobs," Social Security will be my primary means of support. Being on the verge of retirement, I think getting Social Security straightened out is a far higher financial priority than this insane bail-out of companies that are poorly run. It wasn't so very long ago that I could have retired with full benefits at an age I'm already past. I find that quite depressing, as I have worked hard all my life and I'm freakin' tired and ready to stop working full-time!

  • Report this Comment On September 27, 2008, at 12:09 AM, longstreet1863 wrote:

    I guess I am a little confused. Supposedly we are doing this bailout to keep the credit markets liquid. However, I have seen little evidence that they are frozen. Banks are still offering 0% loans to credit card holders. I know I received one. Mortgage money is still available to buy vacation condos, I know because I checked. Interest rates on various rated levels of debt has not spiked. Go check the figures yourself. They have been relatively static for the last 6 months or more.

    I can see where we may have to add capital to the FDIC, but I don't see the evidence of the financial meltdown that everyone keeps saying will come if we don't spend $700 million.

    What am I missing. The analysis I have seen has been atrocious. No one provides any facts but only assumptions and predictions of doom and gloom. Facts would be very helpful.

    So until I hear more other than providing more capital to the FDIC and perhaps more capital to Fannie Mae and Freddie Mac (which we are already doing), I am very skeptical that we need to do anything more very quickly.

  • Report this Comment On September 27, 2008, at 12:09 AM, irfooled wrote:

    O.K., I'm new to all this foolishness but I got to go with the no crowd on this one. I can't see how pumping more money into a flawed system is going to work. Correct me if I'm wrong, but where exactly is this $7B dollars coming from anyway? I'm hoping that the government or the Treasury don't plan on printing more money, wouldn't that drive inflation through the roof and completely destroy the value of the dollar? As far as the taxpayer receiving any benefit from any of this, the short answer is...nope.

  • Report this Comment On September 27, 2008, at 12:20 AM, fooldotcom76 wrote:

    Read this at:

    http://counterpunch.org/

    Bailing Out Wall Street Won't Save Main Street

    By MOSHE ADLER

    Wall Street must be saved for the sake of Main Street, Secretary Paulson and Chairman Bernanke tell us. First, everyone has toxic financial instruments in their 401k's; and second, these instruments are clogging the credit system. But in fact neither claim is true.

    The first claim is not true simply because the majority of Americans don't have any retirement accounts at all. And the claim that the credit system is clogged is not true because there is no object that can be removed in order to clear it. What is true is that the securities that Wall Street invented are toxic. But this is precisely why they should remain where they belong, in the vaults of those who created and pushed them. Otherwise they will poison the rest of us, the poorest among us the most. The government can and should stave off the increase in unemployment, but the only way the government can accomplish this is by hiring workers itself. A bailout will make matters worse.

    If it were indeed true that all Americans owned these new financial instruments, then the decline, or even the total collapse, of their value, would actually not have made a difference to anybody. When the value of everybody's assets falls by the same proportion, nobody gains and nobody loses, because monetary wealth is only relative. Thus, if Wall Street and Main Street were really the same, there would have been no economic crisis to begin with. But the fact is, only 53% of full-time full-year workers participate in a retirement plan, and for Americans who are only part-timers or temporary workers the proportion is even lower. The majority of Americans will therefore not benefit from the bailout at all. But will they be hurt by it? Badly.

    If Wall Street fortunes were to evaporate, the result would be a major realignment of wealth in the country. The rich would become poorer, and as a result the poor would become richer. The very first thing a bailout will do is prevent this realignment from taking place. The rich will continue to have their jets and their palaces and the poor will continue to struggle to go to the doctor and to find housing. Heads, the rich win. Tails? Let's toss again.

    There is no doubt that economic uncertainty leads to low investments and low borrowing. There is also no doubt that mortgage-based-securities are partially responsible for this uncertainty, although the rising price of oil plays an important role as well. But, as Keynes pointed out during the Great Depression, nobody knows how to restore lenders and investors? confidence once it has been lost. And, in all likelihood, passing the mortgage backed security to the government will decrease, not increase, this confidence.

    If the government acquires these securities, it will be left to a government employee (or, more likely, to a private contractor) to decide when ?the price is right? to sell them. But the volume of these securities is fantastically large, and nobody knows how to price them anyway. The effect on financial markets will be colossal. Business schools will start teaching new courses devoted to predicting the behavior of this bureaucrat. New financial instruments will be invented to take advantage of this new "expertise." The government employee herself will either succumb, or be accused of succumbing, to an overwhelming temptation to sell the old-new securities for prices that will benefit those closest to her. The calls to regulate the new-new securities and to monitor the government employee in charge of selling the old-new securities will be deafening. The level of economic uncertainty will increase many times over, and unemployment will increase along with it.

    What Keynes also pointed out during the Great Depression is that the government can increase employment by hiring workers itself. To press his argument Keynes suggested that the government could always hire half the unemployed to dig ditches and the other half to fill them up. But thanks to long years of neglect by the government, there are many government services that Main Street actually desperately needs: More teachers and better school lunches; more public transportation; more public universities with better facilities; more nurses and doctors and more medicinal drugs; more nursing homes for elderly people and more parks for the young; more housing for workers and more childcare for their children. And, Keynes explained, once the government starts using its power to stabilize employment and to increase its citizens? standard of living, there is no doubt that the economic horizon will clear and private lending and investment will rebound as well.

    Normally, this would be the point at which the reader would ask: "But how do we pay for this all?" But not today. First, the government can use the money that the President and Congress want to give Wall Street. In addition, it is now clear that executive compensation is not a just reward. It can and should be taxed, heavily, and perhaps even retroactively.

    Trickle down solutions to free market problems have had more than a fair chance. The only way that the government can perform its job is to work for Main Street directly.

  • Report this Comment On September 27, 2008, at 12:20 AM, frankbooth75 wrote:

    I'm entirely disappointed with this site and will think twice about it's advice in the future. Socialism would never work for our country. A Great Depression era consequence for this country would be the best possible thing to recalibrate the ideals and ethics of our society.

  • Report this Comment On September 27, 2008, at 12:20 AM, bobbycornetto wrote:

    Government abuse is the root cause of this problem. Government trying to create a utopian society by giving EVERYONE a home loan and all but forcing banks to give these loans is the cause. Those that say greed is the cause need to rethink their position. Would any of these lenders loan money to the people that are now defaulting if the government hadn't backed these loan programs? No!

    I'm not defending these institutions. Greedy lenders chasing down this segment of society with loan offers made the problem much worse. But the problem literally would not exist AT ALL were it not for the Federal Loan programs that have no basis in reality.

  • Report this Comment On September 27, 2008, at 12:25 AM, upupaepops wrote:

    Instead of bailing out the people who created this mess, how about letting them suffer for their sins. However, the innnocent should not suffer. Therefore, bail out the little guy.

    1) Raise the minimum wage.

    2) Lower mortgage payments on owner-occupied houses worth $250,000 or less.

    3) Cut taxes on people earning under $100,000; raise taxes on those "earning" over $500,000.

    4) Jail the financial criminals and seize their assets.

    5) End the war and spend that $12B/month on education and health care.

  • Report this Comment On September 27, 2008, at 12:35 AM, LibertyVini wrote:

    Bush is, to quote one student of economics, following the Herber Hoover playbook to a "T", meaning bailing out failing and crooked firms, and preventing assets from being repriced and prices falling. It destroyed the ability of the market to rationalize then; with the amount of acompanying inflation being proposed this time, there is no telling how long a Depression we are in for.

    Inflation = Malinvestment.

    Creating masses of money out of nothing interferes with market signals regarding the wisdom of any particular investment. This causes bad investments. This is Austrian Business Cycle Theory 101, propounded by Ludwig von Mises (who predicted the Great Depression) and Nobel Prize winner Friedrich Hayek, his student.

    Bad investments must be liquidated. There is no way to make them into good investments, much less using capital that, by their own admission is urgently needed by many others. This is called the "sunk costs" fallacy, or "throwing good money after bad".

    Inflation also spreads the misery from those who have earned it (Wall Street) to those who haven't (Main Street). You have all already seen spikes in the price of food, oil, insurance, housing, etc. These price rises are all caused by the unprecedented printing of dollars that has occurred under Bush and Bernanke.

    "Official" inflation is running at 6%, unofficial inflation at 10% or more. Did you get a 10% raise this year? Did you get a 6% raise? Do you think you will see these kinds of raises in an economy awash with trillions in money created out of nothing?

    Let the investment banks take a haircut on this. Let them live with the consequences of what they have called forth. Liquidate their investments, and let prices adjust. There will still be mansions in the Hamptons and townhouses on Park Avenue. They just won't be able to quite afford to redecorate this year.

  • Report this Comment On September 27, 2008, at 12:45 AM, Kensdumb wrote:

    Guess I'm weird. My wife and I own our property, (no mortgage). My wife's favorite words are, "We can't afford it now." So we don't buy it. Yes, we use credit cards, but spend no more than can be paid off each billing cycle. Therefore no interest - and we get rewards checks of $25 - $50 which goes to savings. We drive old cars, have no boats or RVs, buy food on sale and put up some, and rarely buy furniture or TVs. Guess we're dull and not with the times but we're pretty secure. That's my formula for success!

  • Report this Comment On September 27, 2008, at 12:45 AM, bnaski wrote:

    There is no time in recorded history that the government has given back all the money it has taken from taxpayers.

    I'm sorry, I just can't agree with the administration or with Motley Fool that this bailout is absolutely necessary. I would rather go back to gardening, having my relatives move in with me, going to subsistence living then approve $700B dollars given to incompetent legislators and greedy bankers and unscrupulous business people. My trust level in our congress is lower than GW's approval rating. (And that's zero)

  • Report this Comment On September 27, 2008, at 12:45 AM, jaymichaelodell wrote:

    How about we just divide the $700B by the 301 Million citizens. That would be $2.3M per person. We would pay around a million each in taxes and still have a million to pay off our credit cards and buy homes. Or would homes suddenly cost $5 million each. There is something fishy here.

  • Report this Comment On September 27, 2008, at 12:46 AM, jpsandscl wrote:

    well, I am an investor, but I'm not the fool some of these posters are. If unfettered free-market capitalism hasn't been discredited by this point, then I don't know what could or would do it.

    When companies can be leveraged at 30/1 debt to equity, what on earth would make anyone think that could last? Could anyone on this board maintain that? And when so much of our capital markets are tied up in this, when money market funds "break the buck", when there is no capital to be had at any price, then it is more than just the few bad apples going under. It is everything else getting sucked down with them. When I was a child I was taught that one of the great lessons of the stock market crash was the abuse of margins. As always seems to be the case, we've forgotten the lessons of the past.

    And my final point- this sub-prime mess is still only the tip of the iceberg. What they (read all the people trying hard to negotiate these turbulent times- Paulson, Bernanke, congress, etc) are really trying to avoid is the total collapse of a $500 Trillion plus derivatives market. When that comes down, the "woosh" it makes will sweep us all away. It won't matter how much equity you thought you had in your house, because we won't be able to print money fats enough to keep up with it and all of our assets will be worthless.

  • Report this Comment On September 27, 2008, at 12:51 AM, jpsandscl wrote:

    Also, where are people getting these numbers? $700 billion divided by 300 million people is only $2333.00. I've seen this off by so many orders of magnitude, it unnerves me that so many people are so off with basic math and this idea gets repeated so often as to make it seem credible.

  • Report this Comment On September 27, 2008, at 12:52 AM, rickoa wrote:

    ...and whose to say $700 billion is the final number and or even a good number? What about other risks that are out there, such as the credit default swaps. What if there's another shoe that drops and triples this thing. The govt cannot be trusted and the Iraq war, from intelligence gathering to cost estimates are prime examples of how they screw the American people.

    I think it's a dangerous precedence to set. If the collapse of the markets wipes out your savings, how will destroying the dollar not? I don't see papering over this thing as the solution.

    We need a quantum shift in fiscal philosophy in our country. This is exactly the type of meaningful event that will do it. Maybe we should take to heart what the founding fathers said about money. They were very experienced and wise men. I also believe hard times is what bonds Americans and will lead them back to self reliance, instead of entitlement thinking.

  • Report this Comment On September 27, 2008, at 12:54 AM, fooldotcom76 wrote:

    Let it collapse , then maybe - finally - the CEOs and other jumping ship with get what they deserve - what the elite always get when revolution happens.

  • Report this Comment On September 27, 2008, at 12:54 AM, Rafabear wrote:

    Please follow me on this:

    GREED, FROM ALL PARTS

    OVERPRICED HOUSING, TO BEGIN WITH, IS THE FIRST CULPRIT.

    SECOND CULPRIT:

    Credit to marginalized people, is not a bad thing, but if the mortgage is NOT over 20 % of their Gross Income.

    Yes, I said 20 % !!!

    Our families are over burdened with an ultra high price for housing and do not have money to pay for other living expenses.

    If we do not have money for "other" living expenses is not good for our economy.

    This is one reason we must buy cheap, cheap, cheap from China. Our jobs need to be shipped out and our economy has then suffered.

    The American dream is only for the rich, by our standards.

    THIRD CULPRIT:

    ARM mortgages, or better named (Bait and Switch Mortgages) which up the ante to beyond the % that they can bearly pay, to begin with.

    FOURTH CULPRIT:

    Job losses galore and the fact that once you loose a job, you normally have to get a lower paying job to survive.

    Many of these foreclosures are the men and women who are coming back from the Iraqui intervention, please remember.

    DO NOT BLAME IRRESPONSABILITY on 100% of all the mortgage failures.

    Why don't the banks make a fixed mortgage at a lower rate, to save the family, mortgage and America.

  • Report this Comment On September 27, 2008, at 12:58 AM, kotygirl wrote:

    For God's sake, leave it alone. kotygirl

  • Report this Comment On September 27, 2008, at 12:58 AM, haydeneb wrote:

    I'm not sure if I am for the bailout or not. But lets be clear about why we have this problem--IT IS NOT THE BUSH ADMINISTRATION--IT IS THE CLINTON ADMINISTRATION for lowering the requirements for obtaining a mortgage the Fanny/Ferdie would back. The resulting defaults are causing a shortage of money for certain banks to make other loans. This in turn will trickle down causing layoffs, causing more default mortgages, causing more tight money, and the cycle continues until a balance is reached. When will that balance be reached? How deep of a depression will it cause? Let's hope we the commoners can ride it out with no ill effects.

  • Report this Comment On September 27, 2008, at 12:59 AM, FunHater wrote:

    The problem with arguing for a "free market" fix to this problem is that it wasn't caused by a free market. It started with Fed Government madates to loan to people who couldn't afford to buy the house they bought. Check out the American Homeownership Act of 1998 and the "Modernization of FHA". Google and read. The other major cause/issue is the accounting changes related to "mark to market". Besides these regualtory mandates the other causes were just plain stupidty. You had Investment Bankers who had no clue about prudent mortgage lending guidelines, you had "free" money from the Fed. All that these guys were paying attention to were the spreads. The loans which were made were not priced appropriately for the risk, ie., 580 FICO, 100 LTV, at rates just barely above A-Paper. Then to add to the stupidity they were 2-28 or 3-27 loans with 5% to 10% "caps" on the first adjustment and six month interest penalties if they were refi'd prior to the first adjustment. It's a mess. I don't think you can fix it with a bail out. Some how there needs to be accountability. In some ways I say let 'em burn, but in other ways I think 'em are US!

  • Report this Comment On September 27, 2008, at 1:07 AM, LibertyVini wrote:

    To the commenters above, THIS ISN"T FREE-MARKET CAPITALISM. The firms that caused this mess are the ones that illegally colluded with the federal governemt to unconstitutionally create the Federal Reserve System. The purpose of the Federal Reserve System is to give the member banks an exclusive monopoly to print money and regulate its price. If the most fundamental market in the economy is rigged, how can there be ANY free enterprise? It's not a free market, it's nothing but a counterfeiting and loansharking operation.

    In a free market, where sound money ruled, this kind of pyramiding of derivatives, fraud on a global scale, and other crimes would be discovered and liquidated quickly. Instead, we are facing the biggest economic correction in history, with or without the Bailout. The only difference is that the bailout will make taxpayers, not executives poorer.

  • Report this Comment On September 27, 2008, at 1:11 AM, LibertyVini wrote:

    Anyone who buys property other than for cash, or a 15 or 30 year fixed-rate conventional mortgage with 20% down is either a gambler or a fool (and not the Motley kind).

    So, by the way, are those who lend to them.

    Should we make it a policy to bail out gamblers and fools?

  • Report this Comment On September 27, 2008, at 1:18 AM, TuffiTiger wrote:

    What about we let the irresponsible financial institutions go bankrupt, then we can use $700 billion to found new banks and require them (by law) to have a minimum of 20% equity. Such banks would be highly credible and would attract a lot of capital. Then they even could be sold to the public. Credit crisis solved because there would be lots of good money. But of course those banks would not lend to the bad banks. Which means the bad ones will go down. But they gave loans to each other so when A gave a bad loan to B, and B to C and C to A, all that will not affect bank D. A, B, C, go down and D will live. And D are banks like WFC who seem to do just fine.

    BTW: $700 Billion divided by 301 million citizens is not $2.3 million but $2.3 thousand.

    Another idea: Lets use the $700 billion to pay back the credit card debts ($950 billion) and use the saved interest rates to keep good money flowing in the economy, e.g. to wind power and natural gas plans like the pickensplan which will create new jobs in the US.

  • Report this Comment On September 27, 2008, at 1:22 AM, cashwheelbarrow wrote:

    Government Bailouts of Banks and the Mortgage Crisis

    These are my thoughts on this issue and how I believe the government should proceed as of right now:

    1. Immediately investigate the corporate officers of these banks (AIG, Freddie Mac, Fannie Mae, etc) on possible criminal or negligence charges\offenses and place them on trial to determine if any wrong doing occurred with possible jail time.

    2. Immediately require the banks to work with homeowners who are facing foreclosure to keep their homes and restructure their mortgage loans with lower monthly payments that will help in getting them through this difficult time.

    3. Slowly begin to provide these banks\lenders with the “Bailout” financing that the government is considering, but carefully examine how much they truly need in order to function.

    4. If the government does provide the “bailout” financial aid to these banks, then other Federal Government spending on low priority government programs will need to be reduced or eliminated altogether. Those low priority government programs should be audited to determine their usefulness or done away with entirely if deemed unnecessary, (i.e. Dept of Education or any of the ridiculous\unnecessary Federal Government programs you might find in Matthew Lesko’s book, “Ask Lesko”. Some of these lower priority programs and responsibilities could be turn over to duplicate state agencies or non profit organizations.)

    5. The Federal Government may need to consider returning to the Gold Standard and reopen gold mines or other mineral rights in the United States to back the US Dollar in order to deal with these Bailouts and the national debt in general. As a result, the interest rates should be increased to encourage people to save more and discourage them for borrowing more money that they don’t have or can’t afford. Also, income tax rates should be capped and slowly reduced over the next few years.

    These are just some of the ideas I have on the crisis. What with the War in Iraq, terrorism, high energy prices, the falling value of the US dollar, flaws in our immigration system, natural disaster recovery issues, and now this? Yet our current ’08 “election” candidates, congressmen, and senators still like to talk about affordable socialist health care, gay marriage, raising the income tax, polar bears in ANWR, and then proceed to conduct hearings on the eligibility status of Roger Clemens being inducted into the Baseball Hall of Fame! Where are the priorities of the Federal Government anymore? This is insane. All I know is that something needs to be done and done soon, so help us God! Thank you.

  • Report this Comment On September 27, 2008, at 1:31 AM, ForthFool wrote:

    Three cheers for President Bush! Although not always right he has the strength of his convictions.

    The USA put the world into this situation and he accepts that as he tries to put it right. Fix it America!

    Bring those responsible to account and be remembered as the nation that averted the 2008 world depression, not the one that caused it.

  • Report this Comment On September 27, 2008, at 1:31 AM, iamchongo wrote:

    A free market economy is not a God given right. This government, voted for by the people, and through years of bloodshed by the revolutionary and civil wars, with our laws against monopolies and robber barrons ENABLE a free market economy. No government, no free market. The free market just like freedom, is not free. If you want this country to end up like Africa with warlords taking assets by force then so be it. Lets hope you have enough money to employ your own army.

  • Report this Comment On September 27, 2008, at 1:37 AM, LibertyVini wrote:

    Let's get something straight here. A "free market" is simply the right of any person to engage in mutually-beneficial trade with another free from force or fraud.

    Should this be made subject to the arbitrary power of connected insiders (government "regulators")?

    Should it be banned outright?

    How will we survive?

  • Report this Comment On September 27, 2008, at 1:49 AM, TualatinOR wrote:

    What do you think about my long term idea... isn't our greatest asset the hard working American? Bringing in massive amounts of new educated Americans to help pay long term baby boomer retiring citizens for Social Security.. and who will also need Homes,, seems like it would be a good solution.. yes we would all have to make room.. but how else will we compete with China and India long term? Obviously combining forces with Mexico and Canada won't do it.. Mexico would just be a drain.. if you ask me.

    John Bacon

  • Report this Comment On September 27, 2008, at 1:59 AM, iamchongo wrote:

    How can we offer a solution without understanding the problem?

    Mutually beneficial trade...I believe in the tooth fairy as well.

  • Report this Comment On September 27, 2008, at 2:12 AM, LibertyVini wrote:

    @ iamchongo;

    What are you talking about? Don't you engage in fair, peaceful, mutually-beneficial trae every day, as I and most other humans do? Do you need to call a policeman or attorney every time you go to the gas station, or the grocery store, or the bank? Do you pick up an anti-discrimination lawyer every day on your way to work to make sure your employer pays your salary?

    What you are implying makes zero sense. We are under the evil influence of a very rigged game. But the vast majority of trade that we engage in on a day-to-day basis is free, fair, and mutually-beneficial.

    We need these giant government-connected corporations (investment banks) to operate like real, free, competitive business, with government (or alternative dispute resolution mechanisms) to take care of the few border conflicts that would remain.

    We need MORE freedom, not less.

  • Report this Comment On September 27, 2008, at 2:30 AM, larose501 wrote:

    Sorry the reasoning is not compelling enough, yet. Where did the number 700 billion come from what does it include?

    Anytime you invest the flag is waved for you to understand there's no "guarantee" on you investment and the market is subject to rising and falling.

    The last 20 years have stealthly pulled the rug out and left the American people standing on a dirt floor and Wall Street doesn't want to get it's shoes dirty.

    What is worse and more sinister is another side visible to those who will dare to look.

    So Bush is on his way out. This IS his last robbery of the American people? 700 billion for what? Just a blank check? Remember the billions of cash dollars that disappeared in Iraq and we are still footing the bill!

    The American people are already poor. They don't have jobs. The 700 billion dollars will get the companies out of trouble that sent the "real" jobs overseas.

    Why do the American people have to keep paying for a Whipping?

    The President's speech was in the style that has become the Bush legacy, drive them with fear! Control them with fear! Bombard them with fear! When the heist is complete, he will hang up a “Mission Accomplished” banner in the Rose Garden and give an up yours speech.

    Presidents, Politicians, and Pundits are trying to say more mortgages are going into foreclosure because of the current instability of Wall Street.

    The truth is: if the market had continued on without wall street crying, broke the foreclosures coming to the surface would have happened anyway because the visible bad loans only went from 2003 through the first quarter of 2005 there’s still bad loans out there for the rest of 2005, all of 2006, all of 2007 and at least half of 2008!

    Congress and the Supreme Court allow the big companies that bush wants to bailout; to rob your pension funds by changing the terms of contract negotiated pensions to limit your rights to your full pension. If this bailout takes place today, cutting your pension maybe one of the necessary "adjustments to obtain the proposed 700 billion, tomorrow! Giving one man carte blanche to 700 billion is just plain stupid.

    Congress needs to repeal the “Graham, Billings and Leahy act” and all bills, laws or acts pertaining to and assisting in any and all deregulation, or they will just pick up the bailout check and conduct themselves, “business as usual”!

    Congress is pretty stupid anyway; they sign a lot of legislation that they never read, so lets stay on them everybody. Congress has been agreeing to sell this country out for too long now. If they screw this up let’s vote all of them out of their easy jobs. Yeah I said easy! If you vote without reading it can’t get much easier than that!

    Go to congress.org there’s contact info on this website, take those telephone number and call them! Tell congress what you expect out of them, you’re paying their salaries!

  • Report this Comment On September 27, 2008, at 3:26 AM, iamchongo wrote:

    @libertyvini Who do you think gaurantees your right to trade freely? Its doesn't happen by magic...

  • Report this Comment On September 27, 2008, at 3:31 AM, upupaepops wrote:

    The country is in a serious crisis. Government is going to act. There are fundamentally two approaches that it could take.

    1) Make the people pay.

    2) Make the fat cats pay.

    A conservative solution would embrace the first choice.

    A liberal solution would do essentially the same thing, but throw a few bones to the people.

    A radical solution would make inroads into wealth, power, and privilege. It's not going to come from the government so, absent a popular upsurge, it's not going to happen.

    If you want it to happen, you have to make it happen.

    BTW, inaction *is* action, and it has its consequences.

  • Report this Comment On September 27, 2008, at 3:50 AM, 1929rothbard wrote:

    This is a blatant scam, a rip-off of the highest order. The spinmeisters are telling us this is not a bailout of Wall Street and the big banks who own this toxic waste; this is to help the homeowner, the little guy. At the same time, they assure us the taxpayer is making a good investment. Then they try to scare us into thinking if we don't act ASAP life as we know it will end and the financial system will implode, forcing the taxpayer to write an even bigger check. Wow.

    1) The securities (MBS and ABS backed by car loans, boat loans, receivables, etc) Paulson wishes to buy with his blank check at 65 cents on the dollar are trading at 0 to 35 cents in the market. Obviously someone is benefiting from this transaction and it isn't John Q Public.

    2) Home prices nationwide are down about 20% from their highs, but still up 70% from pre-bubble (2000) levels. Any student of financial history knows that bubbles tend to do a total retracement from their launch pads. Even if you adjust for inflation, that means home prices are probably going down another 20%. If so, what will these MBS/ABS be worth that the taxpayer just bought for the low, low price of 65 cents on the dollar?

    3) The spinmeisters are correct about one thing: a crash is coming. But it doesn't matter what the government does. In fact, the more they interfere with the healthy liquidation and cleansing of the excesses of the previous insane boom, the more they prolong and deepen the bust.

    4) Shareholders are always last in line to get paid. I.e., the Motley Fool plan is, well, foolish.

    Despite all the panicky propaganda, this is simply a transfer of wealth from the responsible to the reckless. Call it bailouts for billionaires. In fact, it's funny that the proponents of this plan never seem to volunteer where the $1 trillion plus for these bailouts comes from. Don't you think that's a bit odd? Well, the politicians either have to tax it (good luck), borrow it (again, good luck), or print it (bingo!). That means the homeowner/consumer - the poor slob these jerks claim to be helping - will be facing higher prices at the grocery store, gas station, etc. How this helps our own personal economies is beyond me.

    Enough is enough. This is supposed to be the “land of the free,” not the “land of the free lunch.”

  • Report this Comment On September 27, 2008, at 3:57 AM, 1929rothbard wrote:

    If

    a) you think money grows on trees

    b) you trust your elected officials

    c) you think Paulson & Co.(*) are conflict-free in their advice AND

    d) you think government is the solution and not the cause of this mess,

    THEN, by all means, you should support these bailouts.

    * Henry Paulson was CEO of Goldman Sachs from 1999 to 2006, amassing a $500 million fortune while creating and profiting from the mother of all credit bubbles that raged during his tenure. Goldman stock hit a low of $86.31 last Thursday, right before the Paulson deal was announced. The stock currently trades at $133.98, up 55% from those levels, adding over $23 billion in market capitalization for Goldman’s shareholders.

    Bill Gross, one of the 400 wealthiest Americans with a net worth of $1.2 billion, and founder of Pimco, acted as "advisor" on the Fannie/Freddie creditor bailout. Pimco made a huge bet on GSE debt and scored an $8 billion windfall on the day the deal was announced.

  • Report this Comment On September 27, 2008, at 4:47 AM, ValuePicksOnly wrote:

    Yesterday I heard a very smart Dutch market follower, Willem Middelkoop, on TV asking why the US government doesnt uses the $700billion to buy up foreclosure homes to lay a bottom under the mortgage crisis. This will help taxpayers/people who can no longer afford to pay their mortgage, and when the housing prices start rising again, they can sell the equity with a nice profit.

    The plan of pumping $700billion into the banks to buy up all the garbage from their balance sheets is like throwing that money straight into a CERN created black hole, while the plan of buying up the extremely cheap equity has a nice upside potential.

    Willem also named a sum of $1200billion dollars which was already pumped into the banking system to increase liquidity and that if the state fund will see the daylight that it will most likely not stay at $700billion but will ultimately become a lot more.

    I have not explained Willems ideas as good as he did yesterday, you should have heard him speak for yourself, but then you would have to understand Dutch :P He said he was not someone who you can scare easily, but that now he was really worried about the whole situation.

    I live in Europe and even we feel the effects of this immense crisis, I can not even imagine how you guys must feel over there in the USA...Good luck to you and your country, I hope it will survive this crisis!

  • Report this Comment On September 27, 2008, at 4:50 AM, saigol7 wrote:

    Do you people realize that 700 Billion Dollars is 3 times more than the value of all the gold in Fort Knox?

  • Report this Comment On September 27, 2008, at 4:53 AM, ValuePicksOnly wrote:

    And you want to know who Willem blaimed for this entire crisis?

    The praised Alan Greenspan! <- that guy over there had a whole plan to keep this bubble from popping until he left his function at the FED...he is a disgrace for the American people.

  • Report this Comment On September 27, 2008, at 6:25 AM, QUIETVOICE wrote:

    Several questions really interest me. Why did the prices of housing go up and up? It sent a wrong signal to many people, though some banks were smart enough to see through it.

    Second, if we have to subsidize banks, why subsidize the ones that made the bad decisions, rather than the ones that made the good decisions?

    Thirdly, why did the government nationalize AIG? Since when does the government run insurance companies?

    Fourthly, is there more to the crisis than sub-prime loans?

  • Report this Comment On September 27, 2008, at 8:28 AM, gkirkmf wrote:

    I think we may have the answer at hand to the question how big is too big for a business... A business is too big when the only people who will loan them money is the taxpayer.

  • Report this Comment On September 27, 2008, at 8:29 AM, Mediaplayer wrote:

    Lots of questions.....why wasn't anyone watching the shop? If they weren't watching a month ago what will make them watch now? Do our congressional representatives have our respect? It is sad but less than 20% of our country think that Congress is doing a good job. Do you trust them to make a good decision? Bills are passed with pork throughout, how much pork is in this bail out?

    Somehow making money on wall street became paramount in the last 50 years or so, much more important then making wise decisions for our country's financial future. Unless there is a massive change in our financial structures and major oversight isn't this bail out just delaying the inevitable?

    On wall street where are the heroes that did the right thing when everyone else was taking the cash? If we can find those guys who maintained integrity in the midst of the cash free-for-all we might be able to find the honesty and character to begin a comeback.

    The last 15 years has been a party in the banking/mortgage industry, one that everyone knew had to end. The main players got out with the money. That's what has angered Americans. The reward has gone and is going to the managers and CEOs that failed bigger than anyone in history.

    Do we let free markets reign? Needless to say it looks like the majority of those posting say yes. I definitely believe in free markets, I just wish they had been in place over the last 50 years or so. Manipulation of markets always leads to a financial mess. When markets are free there are crashes but they are shorter with a faster recovery than manipulated markets. Manipulation happens to sustain something that cannot sustain itself and then enriches those who have the vested interest. Eventually they crash and in this wall street crash the manipulation happened so long and was so unnatural it is threatening to take down the whole Western economic system. Who turned their eyes and why?

    What do we do.......the spectre of major pain for our country happens no matter what, bail out or not. What is the best solution? Should we allow a crash that would level the markets quickly with the possibility of a long recovery.......or try a bail out that could or could not work? Do we trust those that put us in this position to run the bail out? I would certainly say no, we need someone who knows what he/she are doing to make these changes. Can it work? Possibly or it could be just the postponement of the reckoning day that would in the end only increase the final cost. We are in a mess, I think we can get out but it will require a leader that is honest, a person of character, not out to line his/her pockets, and one that has the strength to withstand the voices of those who always have self interest at the top of their agenda. We need help.....Pray!

  • Report this Comment On September 27, 2008, at 8:41 AM, stallion50 wrote:

    Didn't think there were so many smart people watching our government. The reason why the jackals are in our government and on Wall street is our media.

    The media and the jackals attack anyone from a normal American life from getting into government. The people in charge have been disconnected from people who have to work for a living .

    We need to let this play out with no bail out. The Jackals will run and the media will back the American people.

    We need to give the people who made this mess a new home. JAIL!

    That will be worth paying for!

  • Report this Comment On September 27, 2008, at 9:00 AM, mdplatte wrote:

    The bailout is one thing. Accountability in government is equally critical if we want to avoid these debacles going forward. The reasons for this problem are becoming clearer with each radio talk show investigation (they seem to be the only ones trying to place blame). We need to name names! Let's place blame - the "affordable housing" push of the Dodd's and Frank's in Congress is a good place to start. Who pushed the mark to market legislation? It should go further - the CEO's of Fannie May and Freddie Mac, AIG, etc. The statute of limitations shouldn't be short on this. And punishments should be metted out.

  • Report this Comment On September 27, 2008, at 9:07 AM, Craterbun wrote:

    I am a swedish small investor and my idea is a charity model for help, like practised when for example nature disasters occur.

    It is said that the 700 billion dollars ain´t enough, so my suggestion is that a charity account is opened, where people all over the world could buy craploans in order to save the world economy.

  • Report this Comment On September 27, 2008, at 9:15 AM, NoMoreBailouts wrote:

    No bailout. I'm disgusted by the position of Motley Fool on this issue. You believe in capitalism so long as its profitable, but once the going gets tough, you want to socialize it?

    Socializing risk and privatizing profit is bad policy and wrong.

    We need to take a breather and not rush to judgment on this bailout. 194 top economists in the US sent an open letter to Congress telling them the bailout would only make the situation worse.

    Contact your representative and let them know you will vote out any legislator that supports this bailout crap.

  • Report this Comment On September 27, 2008, at 9:19 AM, inforthelongrun wrote:

    I have lost all trust in our politicians and Wall Street to succeed on this. Today's 700 billion will be tomorrow's 1 trillion or more. America and perhaps the world needs a wakeup call. I agree with those above who said that these are the same folks who claimed if we didn't go to ware with Iraq, we would encounter dire consequences. I say no, and if a depression comes, so be it. Otherwise I just see the richer getting richer and nothing trickling down. If a depression is needed to teach us all about the dangers of debt and living beyond our means, bring it on.

  • Report this Comment On September 27, 2008, at 9:22 AM, daath wrote:

    The question is wether we can trust the government to strike a good deal with these banks. Our government is certainly not Warrent Buffet. I would not trust Paulson in charge of the bailout who's backgroud is and continue to be favorable to the banks. The AJC article "Wall Street Bailout Plan: 10 reason to just say no" sum up the best.

    "Reason No. 1: The $700 billion Wall Street bailout is merely a “drop in the bucket.” It will not correct Wall Street’s problems. The government’s suggestion that a $700 billion bailout of Wall Street and its bad investments will somehow solidify the markets is simply unfounded. The true facts show that there are more than $12 trillion worth of mortgages outstanding in the U.S. alone.

    Reason No. 2: The bailout plan smacks of cronyism. Treasury Secretary Henry Paulson and many of his chief advisors are Wall Street alumni. Paulson’s close relationship with the Wall Street community strongly suggests ulterior motives may impact his recommendations.

    Reason No. 3: Paulson and Federal Reserve Chairman Ben Bernanke do not understand the problems confronting the American economy and are not qualified “to be king.” Dean Baker, co-director of the Center for Economic and Policy Research in Washington, stated: “This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything.”

    Reason No. 4: The bailout plan proposes to give Paulson unfettered discretion to do as he sees fit with no accountability to anyone and no review of his actions by either courts or administrative agencies. To create a “get out of jail free” card for anyone associated with the proposed bailout offers unlimited possibilities of abuse.

    Reason No. 5: The Wall Street bailout plan is a “knee-jerk reaction” and there may well be better alternatives for spending $700 billion of taxpayer money. The $700 billion plan is aimed at a very small segment of American employees — generally the group of people who have earned excessive income over many years and who live in “ivory towers.” Alan Meltzer, a economic advisor to President Ronald Reagan, summarized the situation saying, “This is scare tactics to try to do something that is in the private but not the public interest.”

    Reason No. 6: President Bush and Paulson have proposed a bailout plan even though they have no idea of what to do. Prior to committing $700 billion of taxpayer funds, our government should at least have a plan on what is going to be done with the money.

    Reason No. 7: The bailout plan will undoubtedly result in a weaker dollar with many adverse consequences for the American economy. David Woo, the Global Head of Foreign Exchange at Barclay’s in London, stated that “the downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis.”

    Reason No. 8: The bailout plan is unlikely to avoid a recession. Even experts who suggest there are long-term benefits to a bailout plan note that it could take the better part of a decade before beginning to show any impact on the U.S. economy.

    Reason No. 9: There is no transparency to the bailout plan. Lack of transparency is one reason our economy is in the position it finds itself today.

    Reason No. 10: Under the bailout plan Paulson and Bernanke intend for the U.S. to pay above- market prices for the assets that the country buys. Bernanke is urging that any bailout plan buy illiquid assets at values above those for which they could be sold on the open market. In other words, Bernanke wants the American people to overpay for Wall Street’s illiquid assets."

    How can you still beliving we should support the bailout plan?

  • Report this Comment On September 27, 2008, at 9:37 AM, Orthros wrote:

    Why do we have to fix anything? "We" lowly citizens didn't create this mess. The management of all the "financial" corporations as well as our "government" leaders and regulators especially Mr. Greenspan, orchestrated this whole thing,

    There is a concept that no one seems to have considered here: the rule of law. All these folks should be tried and convicted of criminal fiscal malfeasance, be given very long prison sentences and have all of their assets confiscated and turned over to the treasury. I think you might be able to squeeze at least a couple trillion out of these bandits pockets. I would also say you can apply the word "traitor" to all of these people. They deserve no mercy let alone a bailout.

  • Report this Comment On September 27, 2008, at 9:49 AM, pberardi wrote:

    "That letting massive portions of our financial sector fail would have enormous negative effects across our economy."

    First off, most of us will in the end support the bill as we understand the ramifications of doing nothing. The people on this board believe in the capitalist system. We have passion for investing and you cannot ignore the fact that we are investors because we live in a free society that allows free markets to exist. Without economic and political freedom, we have no market to invest.

    Second, forgive us for being highly skeptical about a bill that was created by the Secretary of the Treasury (a product of Goldman Sachs) and the Federal Reserve Chairman and highly rushed through Congress for quick passage.

    Forgive us for demanding that our elected officials who work for us actually perform due diligence and understand all sides and interests invovled. Half these congressmen don't even understand what they are bailing out or why?

    Third, we want to make sure this bill does not become another typical Washington special interest pork barrel bill wrought with overspending and waste.

    We want assurance that our free market system remains free and we as investors are willing to take the good with the bad when it comes to the ups and downs of our economy.

    We also want men to behave like men. Stop the begging and whinning! Hasn't anyone lived through a difficult recession before! The economy is telling us that it wants to go into a recession! During recessions, the fed cuts rates, gov't spends money on public works, cuts taxes and we work our way out of it. This is a massive policy change of past government behavior and so we need some time to think things over.

    "That government intervention must protect the interests of the American taxpayer. " So how do you explain that this "bailout" now has a provision that if the taxpayer makes a profit on the $700 billion, Congress will take 20% of the profit and spend it on subsidized housing!

    Right there ruins the bill for me. It tells me that congress once again will spend our money before it even gets it. And the gov't has the nerve to lecture us on transparency?

    "That although we'd prefer a free-market solution, the U.S. government is the only entity with resources sufficient to make a significant impact."

    The gov't does not have the resources. It must print the money to pay for this and give us an IOU until it makes money. The same IOU's it puts in the Social Secrity trust fund? Give us a break. Besides, who pays for the massive inflation that the ordinary citizen will face. Did anyone stop and think how inflation erodes the value of our investments? What makes you think our stocks will be worth more when inflation hits 8%?

    If my 401k needs to fall another 30% do I want the gov't propping up the market only to delay the day of reckoning again? How many day of reckonings are we going to have in this country?

    As someone stated, capitalism on the way up and socialism on the way down. It simply will all blow up eventually.

  • Report this Comment On September 27, 2008, at 10:07 AM, Fit2beTIED wrote:

    I listened to George the other night. Let's see if I got this straight - we need another bailout because if we don't, the stock market will go down, our houses will lose value, and credit will be hard to get. Where has he been for the last year?

  • Report this Comment On September 27, 2008, at 10:36 AM, gojack1011 wrote:

    I am very angry about this whole bailout deal. I am a struggling small business owner. I have to be educated in accounting and economics if I am to remain in business. It has come to my attention that the "mark for market" accounting rule is at the heart of this huge problem. That is, these CDO's are not listed at their collateral value but their market value. So, these securities are not salable so they have no value? No, they are worth what the underlying property is worth, they are just illiquid. This accounting rule was put into effect as a knee jerk reaction to the Enron scandal. The European banking authority warned the Fed about this 3 years ago but nothing was done. I have heard from a few economists that the cost of this BS bailout could be avoided simply by changing this accounting rule.

  • Report this Comment On September 27, 2008, at 10:53 AM, Buckoux wrote:

    The "Fool", and many others commenting, seem to assume that all that money has just disappeared into thin air. It hasn't! It's in bank accounts all around the Globe, just waiting to be put to use in a reformed US market that is absent the political greed that was introduced into the markets by such insidious legislation as the Community Reinvestment Act of 1977 and the subsequent contortions of the financial markets that this spawned, such as sub-prime lending to achieve social ambitions. This whole financial episode has not been laissez-faire capitalism, but a hybrid command economic policy to lend as much money as possible, to as many people as possible, regardless of their credit worthiness in relation to the conditions, present and future of the loans and the borrower.

    The government that the "Fools" want to bail-out this market is the same government that created and encouraged this financial debacle. All is not lost, however! Keep government intervention to the limit of an "honest broker" and let the market fall to its true value and attract the monies that others believe to be "lost". When the Dow returns to a steadily rising level the value will be true and the price affordable.

    And let this be a lesson to you!

  • Report this Comment On September 27, 2008, at 10:59 AM, Kevin1558 wrote:

    This solution came from one of my friends:

    Do we need a debate? NO! Do we want a debate? NO! Do we want to bail out the greedy financial industry? NO! WE NEED to take the $700 billion and give it to all homeowners of record! That is approximately $265,000 per homeowner! Primary residence only. 1st rule- Apply it to your mortgage! That money goes back into the financial industry. If you have money left...and you want to buy a car...it has to ba a car MADE in the US. That money goes into the auto industry. The rest can be used for additional goods and services but must stay in the US. Sure, we may run into a little inflation but we can afford it! Money goes back into the economy where needed. NEXT- Arrest most, if not all the greedy financial people at the c-level. Take their ill-gotten gains and use it to pay down the fed deficit. NEXT- throw out and arrest any member of congress, senate or judiciary that made any profits from or passed legislation requiring/allowing banks to make loans to people that would not normally qualify. Take their ill-gotten gains and apply to the deficit. NEXT-Thow out and possibly arrest any member of congress or senate that did not try to prevent this debacle. NEXT - pass an amendment requiring a balanced budget.

  • Report this Comment On September 27, 2008, at 12:00 PM, noahchilly wrote:

    America was not built on bailouts. This is an insidious insult to capitalism and a slap in the face to free markets everywhere. You can't create standard of living and wealth out of nothing and the market is demanding payment. We can run, but we can't hide. This "Bailout" has no chance in the long run. That money has to be paid back. It will come from 401ks and Wall Street, taxpayers, etc...

  • Report this Comment On September 27, 2008, at 12:03 PM, pseaton7 wrote:

    no, no, No, NO, NOO, NOOO! NOOOO!

    The say thing you say to a fat, spoiled

    kid crying 'cause he ate all his ice cream

    and wants more!

  • Report this Comment On September 27, 2008, at 12:13 PM, LiamFisher wrote:

    So the Captain and crew of the ship and a lot of passengers were smoking in the "No-Smoking" engine room. Lo and behold, the ship caught fire. It began to sink. People were scared but the Captain and crew told them not to worry, things would be OK. Then a big Bear of a person drowned. The Crew said not to worry, it was really his fault anyway. Then another person from LA drowned. Then two of the really wealthy passengers who had Government connections drowned. These two passengers owned companies that employed a lot of the other passengers and loaned money to many, many more. All the while the ship was sinking lower and lower in the water. The crew gave some of the few life jackets to some of the other weathy passengers to save them. One wealthy old gentleman even gave up some of his lifesaving gear to a beautiful and popular lady.....but it was only after a contract was made for regular sexual favors after they we rescued. But still, everyone argued about what to do about this situation. All the while the ship burned and sank deeper.

    My question is this.... Is it really smart to argue about who's fault it was the boat caught fire or who is going to run the Fire Response Crew or what kind of hose to use to put the fire out and all the while the boat burns and sinks further and further into the water? Sure, a few will survive, the strongest will take what they need. But it's a big ocean..... and it's uncertain how long one could be adrift.

    Look, I don't like the idea of funding this bail out any better than I like seeing my taxes go to some welfare bum, some third world despot or some illegal immigrant. But at least with the bail out, I might actually see some return on my money. If the market crashes and my 401K goes belly up, so much for retirement. That's if I can even hold/find a job when company after company closes it doors. The equity in my home? What equity if there is no one able to afford it or, if they have their pick of nicer homes available at firesale foreclosure prices, why should they buy mine? My kids going to college? On what? Their good looks? Not to mention the people that are near the bottom of the economy that don't really have much to lose. What happens when there's no more money for them? The survival instict is a very strong instinct. The difference between man and animal is about 3 days without food. Do you really think desperate people will give a damn about your "civil rights" or property rights?

    Face it, we are all in this boat together. We can ACT NOW and put out the fire and bail the water....... or we can sink. The choice is ours.

  • Report this Comment On September 27, 2008, at 12:39 PM, keddie1 wrote:

    The sinking ship analogy is interesting... .problem is.... the only number we have is 700B... Dear Shipmate... we haven't a clue how much water is coming into the engine room... and they are telling us that there are no water tight doors on this ship... and even more interesting.. the act of saving this ship will consume the entire remaining resources of the Coast Gaurd .....in fact, the Coast Guard (we the tax payers) may well die in the attempt to save this ship.... they are also telling us that if we let the ship sink the undertow will pull us all in as well....while at the same time they are saying ... stay on the ship...

    Just minutes ago the House Republican Leader appeared on CNN and announced that if we don't do something NOW that the economy will crash some time Monday evening or Tuesday.... Really?? I thought it was suppose to crash some time Yesterday... but it didn't....

    The House Republican Leader was asked to give some specifics of what will happen.... hmmmm.. we the tax payers asking for specifics.... we were told to NOT EVEN CONTEPLATE THAT.... ouch! Guess we got spanked for asking...

    I think the person who was pointing out that a recession from time to time is a necessary evil and that we must go through them from time to time is SPOT ON... i.e., (s)he is probably right.... and that there is a very well proven path for deal with a recession...... and that in the end the best a bailout can do is delay that recession..... its a question when we go through it.... and how hard each sector gets hit...

    Nobody is will to put specifics on this.... and as the Motley Fool team is calling this ..

    AN INVESTMENT..... all the wisdom says .. don't invest until you understand the underpinning financials of what you are investing it...

    Maybe we do need a bailout...

    But... really.... what are the underlying financials...

    NUMBERS PLEASE!?

  • Report this Comment On September 27, 2008, at 12:43 PM, mischlingemann wrote:

    Ok. Why isn't Wall Street paying for this? Why do they have the right to burden the rest of us with their asinine, irresponsible and immoral behavior?

    Why should the idiot board members of these institutions get away with this? Their pictures should be plastered on every paper and billboard around our great nation and they should be shamed for their recklessness.

    The wrong people are being made to pay.

  • Report this Comment On September 27, 2008, at 12:44 PM, Digada wrote:

    Think about this: this is the land of opportunity, Warren Bufffet saw this and invested 5 billion so why not use the 700 billion to loan money to startup companys that will become our new credit industry? Nature hates a vacuum such as will be left by the disapearance of the failed lending institutions but new ones will rush to fill the void. Why give this money to the incompetent, greedy and perhaps criminal lenders that have caused this crises. They failed and deservedly so. I propose that the government support new lending institutions that can show an effective business plan and let the failures disappear.

    Digada

  • Report this Comment On September 27, 2008, at 12:46 PM, Misstrial wrote:

    The "bailout" should come with regulations of the finance industry so that this never happens again and financial punishment for the perpetrators:

    1. Everyone who got foreclosed upon or 'walked away' from 2004 - 2011, except for catastrophic medical expenses and job loss, is to pay cash only for a home. No home loans for them ever again.

    2. Real estate agents associated with liar loans are to be prosecuted and banned from selling property.

    3. Appraisers who gave fraudulent appraisals are to be prosecuted and have their license permanently taken away. They should no longer be eligible for a license for anything.

    4. Lenders are to be prosecuted and banned from ever selling any financial products again. No licensure in any profession either.

    5. A permanent credit black mark on anyone declaring bankruptcy associated with a home foreclosure that would expire upon death only. No credit ever for them.

    6. Repeal of the Community Reinvestment Act and forced lending to 'credit-impaired' groups.

  • Report this Comment On September 27, 2008, at 12:58 PM, rdwinsocal wrote:

    The email from jeffbas is almost right on, I did add one more paragraph and sent it to all the congressional leadership, my representatives and the President. I hope some foolish ones will do the same!

    "Additionally, let us not mix apples and oranges or buy or use as collateral sight unseen. The current indications of the liberal lawmakers wanting to attach tax-related issues to this “transaction” might well be the proverbial “straw that broke the camel’s back.” Let us have Congress quit passing legislation that cover everything from the financing of studies to awarding military weapons contracts to foreign nations all in one bill. Keep the apples with the apples. This should be a straight “business contract” to buy the outstanding loans from or provide a loan to financial institutions for the sole purpose of covering those low-quality loans that began back during the “everyone owns a home” Clinton era that have finally turned horrifically bad."

    I think since both candidates are talking change in Washington, this additional paragraph is pretty much directed to them and now is a good time to start.

  • Report this Comment On September 27, 2008, at 12:58 PM, HOPEofUSSA wrote:

    Back home there is a saying, "You can't put 2 tons of manure in a 1-ton truck.

    That is until you get to Washington.

    While we sit back and watch them again throw principal and principle to the wind, could we first bailout America's citizens by paying off the USA's debt interest early that the Chinese own. Then re-distribute those same treasury bills & bonds equally among our citizenry. As Americans, we should own and owe our debt to ourselves collectively as a nation and owe outsiders nothing. That way they stay outsiders.

    Hey, maybe when the American people again have stock in their country they would lose the apathetic, uneducated, sheep-like tolerance of know-nothing politicians. Who are also like the biggest of bankers and corporate heads - only in this game for themselves. They are each inseparable - because they can't function and prosper without the other. Its time their influence was unmasked for what it is - control. What you are watching unfold today, folks, is not FREE ENTERPRISE. Certainly not the FREE ENTERPRISE system that your great grandparents utilized. Just watch from the sidelines on how this vote goes down. Because that is your allottment of control. You get to watch.

    When the two parties get done with this "could-have-been-prevented emergency" of bickering and jockeying for a position of control to vote maybe they could take just a quick minute to vote in that long sought after change of the flag we raise and also maybe a little vote for changing our currency system. And as always in the name of FREE ENTERPRISE. And maybe, too, they've already thought of a name. Like the creation of the Euro, we could be the North American Treaty peso dollar. And our flag could read United Socialist States of America - USSA.

    Viva free enterprize, amigos and amigas!

  • Report this Comment On September 27, 2008, at 1:04 PM, moneyrick wrote:

    If government bails these institutions out we would be moving towards a socialist society. I thought this country was all about capitalisim only! Why would we the people give money to the folks that messed up in the first place? It's just like giving putting cash in your Uncle Pookie's hands who is a crackhead. No wonder America's credibility have went down with other governments. BAD JUDGEMENT!

  • Report this Comment On September 27, 2008, at 1:15 PM, Misstrial wrote:

    One more thing:

    2 days ago I read on a msm site that many of these jerk-bankers/investment company CEOs who lost their jobs were moving to their 2nd home in Aspen.

    Maybe its time to boycott Aspen.

  • Report this Comment On September 27, 2008, at 1:26 PM, keddie1 wrote:

    About "is smart to argue about whose fault it is...

    - hmmmmmm

    the first rule of troubleshooting is to "understand the problem"....

    Its pretty clear that "nobody does".... only that it seems to be centered on Wall Street....

    Someone has to figure out how this is going to REALLY PLAY OUT before we can take appropraite action..... and nobody knows..... all anyone knows it that Wall Street wants 700B of our Money....

    Now... just an hour or two ago the House Republic Leader was on CNN saying that if we don't do something Sunday or Monday morning, that companies will not be able to finance payrole Monday evening or at the latest ... On Tuesday....

    Oh Really!!......

    I know that many companies need to finance their working capital.... and working capital includes some payrole....

    But isn't it the case that a properly run company makes enough money to make payrole out of current revenue.... they may finance working capital and use loans to smooth out the ups and downs of revenue.... doesn't a responsible business at least control its financial affairs sufficiently that they can make payrole....

    and just now ... the CNN financial expert (the blond lady) just said ... "WALL STREETS BROKEN'...

    Who says???? If you make bad decisions then things get ruff... that's not broken... that's the way it is suppose to work.....

    They are also saying "leave your money in wall street..""

    Wait... "Its Broken".... "Leave your money there".... hmmmmmmm....

    Sounds like a conflict of interest....

    Usually if a machine is broken ... you take it off line..... you don't continue using it....

    so... which is it... is it broken... .or is it fine and we should leave our money there... which is it...

    SPECIFICS.... I've heard only one specific .... 700B..... and even that is ...

    and I quote...

    "a Hope"...

  • Report this Comment On September 27, 2008, at 1:28 PM, JeannetteC wrote:

    Government intervention...best thing in the world for corporation, especially when the government allows the corporations to run/BE the government....worst thing in the world for citizens.

    Another example...home owners' insurance. For years people have paid home owner's insurance premiums, with many of those people never having filed any claims.

    After Katrina, the government stepped in and took almost all the risk away for the insurance companies and saddled us with it all for hurricane damage.

    We still get to pay our monthly premiums, which is higher across the board for *everyone*, and hurricane damage is still covered. In addition to the higher overall premiums, the other difference is that in addition to the regular deductions, there is now a 'hurricane damage' deductble.

    Insurance companies charge an addtional 2% to 5% of the total amount insured. For a $260,000 home, a 5% hurricane deductible is $13,000. Bigger homes...bigger hurricane deductibles.

    How many people can shell out 10s of thousands of dollars in an emergency? How many people can take on addtional loans to fix their homes in an emergency? What good is home owner's insurance for the majority of people who never have other types of claims? Unfortunately, if you have a mortgage on your home, you have to carry the insurance or you don't get a mortgage.

    Insurance companies are in the 'risk' business. That's what they sell for crying out loud. So why did the government bail them out and allow them to collect more money from us for this risk service, but gave them immunity from having to provide the service or have to pay out of their pockets for the service that we are paying them for? This is criminal!

    That's all any government subsidies do. They take away the financial risks for businesses to do business, and put that risk on all of us.

    I totally fear the consequences for all of us, but we're going to pay the consequences either way this goes.

    SO. I have to agree. No bail out.

    We've got to take a stance at some point, and I see no better time than the present. If we don't stand against this now, it will continue to happen, corporations will still own and run our government, and nothing will change. That's just more corruption and misery that we'll pass onto our children.

    And the only way I know of to end all of this is to stop voting incumbents back into office....which will only continue to allow the corporations to own/run/be our government. If you continue to vote for the duopoly, you're continueing to vote for the corporations as well...because for a long time now.....the duopoly is one and the same.

  • Report this Comment On September 27, 2008, at 1:33 PM, JohnTex wrote:

    If you have stock market investments, you need the Paulson bail-out plan to prevent the value of your investments from getting cut by at least 1/3 and probably more.

    If you want to see another great depression and continuing bank failures - just put McCain and Boehner in charge of fixing the problem.

    We had a bipartisan plan agreed to until McCain flew in like Mighty Mouse at the last minute and screwed it up.

    It isn't a matter of rewarding the big corporations - it is a matter of preserving savings and investments and jobs of everyday Americans.

  • Report this Comment On September 27, 2008, at 1:47 PM, GoNuke wrote:

    You who oppose the rescue continue to miss the point. I don't think you understand the kind of "credit" that is being discusses. You are looking at your credit cards and car loans.

    The issue is not consumer credit except in the case of housing loans.

    As a senior manager of a manufacturing firm I can tell you that short term credit is used by all well managed firms to carry on daily operations.

    The credit freeze will slow or halt the daily operations of many of the companies in the US that keep the nation's economy going and employ most of its citizens -like you.

    It has nothing to do with fundamentals like creditworthiness or debt/equity ratios. It has to do with financing receivables and inventory or posting completion bonds. It has to do with the lag between the time you receive raw materials from your suppliers and you get paid for the products you make.

    This lag can be weeks or months. In the meantime your company has to meet its payroll. Vendors typically extend 30 days credit to customers and employees extend an average of 7 days (based on getting paid every two weeks). Your company extends credit to its customers. Accounts receivables must be financed so your company can pay its suppliers and meet the payroll. No short term credit, no payroll. Being forced to pay cash for raw materials severely limits what your company can buy if your company's short term bank credit dries up -if the banks don't have the cash to lend.

    All business operates on short term credit which is fast disappearing. Companies with solid balance sheets will not get access to short term credit because there isn't any to be had. This is not related to personal indebtedness or individuals who are overextended.

    It has to do with financing ongoing operations of companies. If you stop companies from operating -which will happen; you will see a massive increase in unemployment.

    People who are good security risks today cannot borrow money to buy homes so the price of homes keeps falling. These same people will become bad security risks when they lose their jobs. House prices will fall further.

    Make no mistake, the freeze-up of the credit markets will harm everyone including those that have acted prudently.

    People who understand how short term credit makes industry function understand how perilous the current situation is. If you are just an employee you probably have not been exposed to the consequences of the credit freeze.

    You can't project your personal experiences as a consumer onto the operations of a business. If this rescue is not approved many of you will find yourselves unemployed. You do not want to learn this lesson the hard way.

    The nation, once affluent will become poor and house prices will have to fall to reflect that poverty. Even if your house is paid for it won't be worth near what you paid for it. You will be poorer.

  • Report this Comment On September 27, 2008, at 2:31 PM, baekeland108 wrote:

    Quite a few posts up a user by the name of INTERPERK has it right on the mark. You know "Fools" and I m not talking "Motley Fools" here we can write and write and write to our so-called elected officials until we are BLUE in the face to no avail. All of us "Fools" (including myself) should put "OUR" money where our mouths are: On Monday sell all of your holdings, sit back, weather any "supposed storm" (because we know they (our so-called elected officals") will pass the financial "bailout" with or without us) and let's see what happens. Action always SPEAKS louder than words.

    What is with The Motley Fool's 360 degree turn concerning this financial bailout?

    What is this letter from the "President" of The Motley Fool?

    I have been a member since 1999 and I had no idea there was a President.

    I was always under the "illusion" that The Motley Fool was run by David and Tom Gardner & Staff where did this President come from? I wonder what his salary is?

    I have been pounded and pounded on the head by The Motley Fool about being frugal, living within my means, avoiding credit where I can, et cetera. Yet here they are with there own credit card -- what's up with that?

    They used to have really GREAT articles that at the end did not ask you to become a member of one of their magazines for future stock advice. Perhaps, the "President" of The Motley Fool and Tom and David ought to look at what The Motley Fool has become. It certainly is not what it once was. It seems to have become just another money making machine. They even have us doing some of the work of finding great stocks under the Guise of "CAPS."

    I would really like to see how "frugally" Tom and David live.

    I understand making money and working your as*** off should bring rewards. But doing it on our backs is as bad as this Government Bailout -- if you think they do not work with Wall Street -- think again, Wall Street would have them shut down so quick if there was not a relationship there.

  • Report this Comment On September 27, 2008, at 2:38 PM, garyc27 wrote:

    What you’re tell me is that we need to bailout Wall Street and a failed Democratic Party social engineering program. The taxpayer is already on the hook for:

    Housing and Economic Recovery Act of 2008 $300 Billion

    Bear Sterns Failure/Buyout $30 Billion Credit Line to JP Morgan

    (Hey, remember when Bear Stearns had an incredible 5 fold increase in stock value in 24 hours)

    AIG $85 Billion

    Freddie and Fannie 5% of $6 Trillion or $300 Billion

    Add in the Paulson rescue

    $700 Billion

    Unless my calculator stopped working this comes to over $1.4 Billion

    If you want me to buy into this it must be with the following stipulations:

    1) Someone check on the constitutionality of the proposed Paulson government bailout

    2) President Bush must sign the FDICIA waiver allowing Treasury and the FDIC to inject new capital into banks early enough to prevent failures. The feds must impose management dismissals and receive preferred stock or warrants that will protect the taxpayers when the banks recover.

    3) Profits, if there are any, are to be used to pay down the national debt and for no other purpose

    4) Oversight must be done by people not in the government (i.e. people that we can trust such as Warren Buffett, Bill Gates, etc.)

    5) A full investigation of what the following government individuals knew about this impending financial disaster, why they did nothing, and why they did not warn us: SEC Chairman Christopher Cox, Senator Charles E. Schumer, Congressman Barney Frank, Senate Majority Leader Harry Reid, Speaker Nancy Pelosi and Senator Christopher Dodd.

    6) Absolutely no golden parachute payouts to executives

    7) Eliminate the “mark to market” and mark to model accounting after this mess is cleaned up

    8) Repeal Sarbanes-Oxley

  • Report this Comment On September 27, 2008, at 2:38 PM, financegooglecom wrote:

    Any macroeconomic professors in the house? I don't have an opinion that counts when it comes to our ENTIRE USA ECONOMY. Neither do most of us here, as far as I know. Some smart individuals with credentials please take the time to explain the FULL arguments on both sides. This is a huge pool of people and smart investors. Lets evaluate this problem like adults with college degrees and level heads.

    Thats means your too Motley Fool. Get some PhD 's and market gurus to help us out.

    And the Emmy goes to LiamFisher for a beautiful metaphor, whether or not he's right.

    And a Gold Star to daath for using facts, names, and complete sentences in his compelling and logical arguements.

  • Report this Comment On September 27, 2008, at 2:43 PM, energyman08 wrote:

    Yes, the contraction of credit will have a devastating effect on business as we know it. As a former small contractor, having to pay up front for everything would have limited growth and made operating very awkward.

    In some financial post apocalyptic USA, we all might have to pull together, issue local script, cooperate, help each other, leave something on the table for the next guy. Ohmygod! I sound like those Commies they warned us about when we practiced 'duck and cover' as a way to protect ourselves from the Soviet Ogre.

  • Report this Comment On September 27, 2008, at 2:48 PM, baekeland108 wrote:

    Hey Nuke,

    Fear-mongering does not help the current situation. I work in accounting at The University of Pennsylvania (the largest employer of Philadelphia) and they do not use the 30 day principle you espouse, rather it is 90 days and they swallow the penalties and fines of their vendors because the 90 days gives them 3 months for investment of the owed money. Hence, they not only have the money for the initial bill + fines + penalties but a nice little profit for themselves.

    NO MATTER WHAT THEY "OUR ELECTED OFFICIALS" WILL PASS THIS FINANCIAL "BAILOUT" REGARDLESS OF WHAT ARGUMENT IS PUT FORTH -- BANK ON IT -- PUN NOT INTENDED

  • Report this Comment On September 27, 2008, at 2:51 PM, wiseclack wrote:

    Good Grief! Such vitriol!

    I too detest the "bailout", but see no other option, and the Fool's read is as good as it gets.

    To those of you who rail against the government, remember you elected them! If you don't trust them get them out! Seek honest candidiates who keep the welfare of our country first, rather than reelection.

    If you are (or were) a stockholder, attend those annual meeting and protest obscene salaries and golden parachutes. Write to members of the BoD and express your outrage. If all of us do this, things will change.

    Also get out the warrants, and demand accountability.

    The ship IS SINKING taking the "good" and the "bad". If we could just shovel the "bad" overboard that would be great.. Unfortunately, we have to save the "bad" to save the "good".

  • Report this Comment On September 27, 2008, at 3:08 PM, grumpytimm wrote:

    Is it too late to return to the days of local

    banks that lent THEIR money to people in the THEIR community and actually held the mortgages (ala "Its a Wonderful Life)?

    They could actually require a down payment which would force people to save.

    Of course the PTB couldn't make billions

    repackaging loans.

  • Report this Comment On September 27, 2008, at 3:39 PM, baekeland108 wrote:

    A Very Interesting Article Concerning Our Current Financial Health That We All Could Live With.

    THE NATION HEALTH, SCIENCE & ENVIRONMENT

    The Next Bull Market

    by GLENN HUROWITZ

    September 25, 2008

    "There's always a bull market somewhere," goes the old Wall Street saw, and it's a principle that Washington needs to keep firmly in mind as it contemplates its trillion-dollar financial bailout. Today, that bull market is in green investing, which includes everything from wind and solar power to forest conservation.

    The emerging compromise on the bailout is better than Paulson's original proposal, but falls far short of what needs to be done. Congress and the next president will have a lot more work to do.

    The road to recovery requires more than a bailout. Americans deserve apologies from Washington and Wall Street--and a new president capable of telling the truth and leading us forward. Something needs to be done--something fair for the American taxpayer--to salvage Wall Street. We want the same deal Warren Buffet got.

    Now is the moment to kick neoliberalism into the grave. We won't get another moment like this in our lifetimes.

    Without an energized populace, expect nothing more humane than the rescue of a failing financial system.

    What do the people get from this bailout?

    Since 2001, the wind industry has grown 339 percent; the solar industry has grown a whopping 579 percent; both are projected to continue their blockbuster double-digit annual growth into the foreseeable future. In contrast, the Dow Jones average has climbed just 2 percent during the same period, and is only barely hanging on at those levels because of the artificial boost produced by talk of the bailout.

    Instead of shoveling good money after bad, Congress should put its money into developing this booming green economy even further.

    Truly green companies aren't just providing returns to investors. They're also an employment engine that is offsetting the job losses related to the high price of oil and the housing collapse. Tens of thousands of people are today employed making wind turbines, installing solar panels and making American cars more efficient. But those jobs could be only a very small beginning compared to what is possible.

    A recent report report by the Center for American Progress estimates that investing just $100 billion in the green economy (one-seventh the amount contemplated in the administration's proposed Wall Street bailout) would create 2 million new jobs, with a significant percentage of those coming in the struggling manufacturing and construction sectors. In contrast, investing that much money in the financial services sector would generate just 1.1 million jobs, according to an analysis conducted by the study's authors, Robert Pollin and Heidi Garrett-Peltier of the University of Massachusetts. In other words, Wall Street's offering about half the jobs for the same money: hardly a smart bet for the taxpayer.

    A green investment on the level of the Wall Street bailout could create growth on a much larger scale, almost entirely eliminating unemployment and significantly raising middle-class incomes. Instead of golden parachutes for CEOs, the government could finance America's transition from an oil- and fossil-fuel-dependent economy into one run completely on clean energy. Instead of buying up bad McMansion mortgages, we could pay people to retrofit their houses with high-efficiency appliances and green roofs.

    The green stimulus could reach far beyond the energy sector to provide income and employment for rural America as well. It could finance the conservation of tens or hundreds of millions of acres of wildlands, providing income to farmers and other landowners--and make possible a whole new generation of national parks. (Many of those lands are now under threat exactly because of too-easy credit: without limits on lending, it's been all too easy for real estate developers to find the cash to pave over back-country wilderness for sprawl and ranchettes).

    This money also could seed a new technological revolution in agriculture--away from land-, energy- and water-intense cultivation and towards exciting new developments like skyscraper farms--essentially huge, multi-level urban greenhouses powered by clean energy that use a fraction of the land, water and pesticides of conventional agriculture.

    There would be major indirect economic benefits as well. As clean energy took over from oil, fuel costs would plummet, removing a major impediment to growth: running a plug-in hybrid on clean energy, for instance, costs the equivalent of less than $1.50 a gallon.

    But the biggest benefit of this green recovery will come from solving a looming financial threat as great or greater than the current one: global warming. Conservative estimates place the costs of increased disease, flooding, drought, extreme weather, insect infestation and other impacts of the climate crisis at somewhere between 5 percent and 20 percent of global economic output. For the United States alone, that adds up to a conservatively estimated $3.8 trillion drag on the economy--every single year. A big green investment now would take a huge bite out of the climate problem while we wait for the political stars to align behind comprehensive global warming legislation.

    Of course, spending money on a green stimulus instead of a bailout would have consequences for the big firms at the root of the financial mess. Some of the failed Wall Street behemoths that are relying on teachers, soldiers, policemen and small-business owners to bail them out would probably sink.

    In their place, however, a whole new multibillion-dollar green economy will rise--and with it the kind of massive financial opportunity that could get not only America but also Wall Street back on its feet.

  • Report this Comment On September 27, 2008, at 3:49 PM, lagojohn wrote:

    This is just another hoo ha ripoff of the middle class, just like the S&L crisis was. Not only that but it is the same crowd.

    Funny how all the top economists are opposed to the bailout and even funnier how the pro-bailout 'free market' crowd wants to socialize the debt incurred by those making millions.

    Even if there were a need to 'bail out' this gang with taxpayer dollars, doesn't that mean the taxpayers then own the concerns needing the bailout and thus, own the profits. Some of these guys make upwards of 200 million a year and there are 305, 272,957 people in the US.

    So that comes out to around 655,000.00 per person. Let's do it that way if you really want socialism. Talk about an economic stimulus package.

  • Report this Comment On September 27, 2008, at 3:56 PM, keddie1 wrote:

    Isn't it 2300 dollars per person.....

  • Report this Comment On September 27, 2008, at 3:56 PM, baekeland108 wrote:

    Here is the reply I received from my "elected official," Senator Robert Casey today:

    Everyone is worried about the turmoil in our financial markets. The credit and liquidity problems that affect banks and brokerage houses also threaten employers and small businesses as well as the savings and pension accounts of working families. This is not simply my opinion, it is the assessment of the Chairman of the Federal Reserve, the Secretary of the Treasury, and many economists and financial experts in our country.

    Like you, I am not happy with the current crisis, and I’m angry about the eight year climate of deregulation and deference to Wall Street that got us into this mess. Over the past few weeks, I have talked personally to financial experts from Federal Reserve Chairman Ben Bernanke to respected economists. I have studied various proposals to improve the situation, and I have closely questioned the Secretary of the Treasury and Chairman Bernanke as a member of the Senate Banking Committee.

    Based on the many conversations I have had and reports I have received, I have come to believe that the federal government has to intervene soon and in a serious way. Otherwise, the consequences could be very bad for our families and our economy.

    Here is what some experts have said:

    "Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option,” said Paul Krugman. (New York Times, September 26, 2008)

    "Without trust and confidence, business can’t go on, and we can easily fall into a deeper recession and eventually a depression. It would be disastrous to have no plan,” said Andrew Lo, a professor at the M.I.T. Sloan School of Management. (New York Times, September 26, 2008)

    "The problem is so big that if somebody doesn’t step in, it will cause a panic. Things could worsen to the point that we could see double-digit unemployment,” said Michael Moebs, economist and chief executive of Moebs Services. (New York Times, September 26, 2008)

    "…but the need for speed is clear. In this case, there really are weapons of mass destruction -- financial derivatives -- that threaten to destroy our system from within. Move quickly, Washington, with appropriate safeguards,” said investment manager William H. Gross. (Washington Post, September 23, 2008)

    "The credit markets are nearly dysfunctional, leaving the economy at risk of falling into a downturn unlike any most of us have lived through, and the government is about to commit billions of dollars after only a week of political debate. There’s no time to waste,” said economics columnist David Leonhardt. (New York Times, September 24, 2008)

    "Most importantly, it is not clear that the bailout will actually impose any net costs on U.S. taxpayers, since it may prevent further systemic effects that bring down the financial sector and, with it, the world economy. Just because system effects are difficult to quantify does not mean that they are not real,” said Robert Schiller, the Arthur M. Okun Professor of Economics at Yale University. (The Guardian, September 19, 2008)

    "If nothing is done, the potential for these markets to seize up in a big way is definitely there…When you look at the history of these crises, when things spin out of control, the cost to fix it later goes up exponentially," said Frederic S. Mishkin an economist at Columbia University who was a Federal Reserve governor until last month. (Washington Post, September 26, 2008)

    "It's easy to forget amid all the fancy stuff - credit derivatives, swaps - that the root cause of all this is declining house prices. If you can reverse that, then people start coming out of their foxholes and start putting their money in places they have been too afraid to put it," said Alan Blinder. (International Herald Tribune, September 21, 2008).

    "Wall Street isn't this island to itself. Even people with good credit histories are having a very hard time getting loans at terms that make sense. If that gets worse, we're going to be stuck in the doldrums for a very long time, because that directly blocks healthy economic activity," said Jared Bernstein, senior economist at the Economic Policy Institute. (International Herald Tribune, September 21, 2008)

    Like many people who have called my office, I did not think that the original proposal from the Bush administration to deal with the crisis was adequate. Any remedy has to put limits on the salaries and bonuses of the executives whose companies would be helped. The proposal also has to protect taxpayers' investment and give that investment a chance for a profit if the asset purchases work. And, in the long run, we need regulation to make sure that this crisis does not happen again.

    I have told the Administration and my fellow Senators that any plan has to contain the following elements:

    • Executives must be held accountable and their compensation must be limited, including the elimination of golden parachutes and claw-back provisions if performance does not match previous pay;

    • Taxpayers must be protected and the Treasury must demand warrants and other forms of equity from financial institutions that participate;

    • Substantial oversight by outside agencies including the Government Accountability Office and Inspectors General must be built in to ensure accountability; and

    • Conflicts of interest and contracting rules must be enforced.

    In addition, the plan should be expanded to include substantial measures to end the foreclosure crisis and stabilize housing prices. This includes:

    • Expanding government efforts to restructure mortgages it owns through FDIC, Fannie Mae, and Freddie Mac;

    • Expansion of the recently passed HOPE for Homeowners plan to let FHA refinance families into affordable mortgages; and

    • Allowing more mortgages to be restructured under judicially supervised loan modification procedures so that people who can afford to keep their homes and pay their mortgages are able to.

    I know that the people of Pennsylvania take responsibility for their actions, pay their bills, and avoid unwise risks. I share their frustration that a system running out of control and paying exorbitant salaries to those responsible is now threatening prosperity for all of us. However, these risks are real – even for the most responsible Americans. I am working to find a solution that will:

    • Protect our homes;

    • Protect our savings and retirement accounts;

    • Protect our small businesses;

    • Protect our ability to send our children to college; and

    • Protect our jobs.

    Failing to act will not simply punish those who brought us to this situation. It will punish everyone.

    Here are the actions I have taken so far:

    • Spoke on a Conference Call with Secretary Paulson and Chairman Bernanke on September 19;

    • Wrote to Secretary Paulson and Chairman Bernanke on September 19. CLICK HERE to see the letter;

    • Spoke with Chairman Chris Dodd several times over the weekend of September 19th and throughout this past week;

    • Participated in a hearing of the Senate Committee on Banking, Housing and Urban Affairs on September 23, where I questioned Secretary Paulson and Chairman Bernanke. CLICK HERE to read my opening statement;

    • Participated in a Joint Economic Committee meeting on the State of the Economy with Chairman Bernanke;

    • Wrote to Secretary Paulson and Chairman Bernanke again on September 24. CLICK HERE to see the letter;

    • Participated in a Caucus Meeting with Senate Democrats and Secretary Paulson and Chairman Bernanke; and

    • Spoke with Chairman Bernanke on the phone following the White House Meeting of September 25.

    I will be working in Washington this weekend. I will continue to push for solutions to this crisis and I will continue to report to you on our progress.

  • Report this Comment On September 27, 2008, at 3:57 PM, JeffSinatra wrote:

    I’m a concerned US citizen who thinks the “bailout” needs far more protections so I propose the following “Sinatra Bailout Plan.” Who knows, it may actually work:

    Every company that needs assets removed from their books would give up a 20% equity stake in Preferred stock to the US Government. These companies would immediately suspend dividends for 3 years to stabilize their companies and protect the taxpayer investment.

    The real estate backing the loans would then be put into a protected Social Security Trust Fund (with the stipulation that it cannot be used by politicians at any time under any circumstances). These assets would be sold later to pay for the shortage in our Social Security / Medicare System.

    All preferred stock would be distributed to all US Citizens 18+ at the end of each year.

    These preferred shares could be sold in the stock market or held - regardless, it would put wealth back into the economy without too much inflationary pressures of sending cash to US citizens, as has been proposed.

    While the common shares of these companies would be diluted to some degree, it’s far better than having these companies/banks go under.

    American citizens would actually have an equity stake in the “bailout” and as these companies turned around these shares would gain value and gradually push more wealth to all citizens.

    Also, as Real Estate values turn around in the years ahead, a new protected Social Security Trust Fund may actually survive (currently, the existing trust fund is empty and the only way someone in their 30’s will get any benefit is if the income tax rate increases to about 60%)

    Under the Sinatra Plan, US Citizens would own a stake in this bailout and we would fix one of the most important problems facing our younger generation, the Social Security System. Under the Sinatra Plan we can turn this crisis into an opportunity.

    If the assets backing the mortgage paper is allowed to go to the government, it is highly likely these assets will be liquidated by politicians to increase spending in the future. The chances these assets will be sold to repay the bailout is unlikely. It will be turned into a giant piggy bank that politicians will use for years as they spend this country into oblivion. By placing these assets in a protected Social Security Trust Fund they will not be able to touch them. Unfortunately, politicians in this day and age cannot be trusted.

    This plan is more realistic than writing massive checks to the citizenry, and better than sending huge amounts of cash to Wall Street banks. It’s a reasonable plan that would actually work, but we need to spread the word quickly before our politicians create for themselves a Trillion dollar slush fund.

    Send this plan to everyone you know before it’s too late…

    By the way, there seems to be a push to make sure the politicians have “oversight” and “control” over these assets. Why would we want the folks who put us in this position to control anything? Those real estate assets need to be put on a high shelf where no politician can reach and a protected Social Security Trust Fund may be that safe harbor.

    Jeff Sinatra, a Concerned Citizen

    http://sinatraco.com/blog/2008/09/27/the-sinatra-bailout-pla...

  • Report this Comment On September 27, 2008, at 4:08 PM, keddie1 wrote:

    With all due respect, I don't think we have misuderstood... The people on capitol hill working on the capital credit problem ... ARE saying that it directly affects things like credit cards and the ability to buy cars, gas, and pay for food... they are definitely saying that!

    What they are proposing to do to fix it is to focus the bailout on the capital credit for corporations.... and mortgages...

    so I think we do get it...

    What we are questioning is...

    - the specfics...(again there aren't any)

    - and the wisdom of solving it in this way

    I know of no problem that doesn't have at least TWO or MORE solutions..... one of which is ..

    DO NOTHING....

    Look... the sky was going to fall on Thursday...

    Then they said Friday...

    Now they are saying Monday evening or Tuesday...

    Seems that the sky is falling is moving ..

    day for day.... and ... oh gosh.. it moved three days over the weekend...

    The Fed has already offered a credit behicle to these folks..

    They didn't use it....

    There is an element of the Wringing Towel Scenaro... If you Wring a towel.. and water comes out .. what is the next thing you do.... you wring it again..... if more water comes out.... guess what...

    In this case, the towel is the federal government and Wall Street is wringing.... the Fed gives up some water (money) and gues what happens.... Wall street wrings the towel again....

    Or... to quote Harrison Ford on Air Force One... give a mouse a cookie..... and he'll come back for a glas of milk...

    we'll see what the Federal Government does....

    I think we get it though....

  • Report this Comment On September 27, 2008, at 4:17 PM, keddie1 wrote:

    Thanks for posting the response from Sen Casey...

  • Report this Comment On September 27, 2008, at 4:24 PM, SBANANA1 wrote:

    OK OK OK, Imprison bernanke and paulson. please pardon bush, he really is too dumb to understand whats going on. congress needs to be shuffled. Write in RON PAUL!!http://www.youtube.com/watch?v=8pEiLHnjAiw&feature=relat...

  • Report this Comment On September 27, 2008, at 4:33 PM, spongeworthyusa wrote:

    Fools said>If the reliability of our credit markets is undermined, there are innumerable consequences.

    Fools said>For the economy, the credit crisis means lower investment,

    Ok, that's bad but how's it the end of the world?

    Fools said>lower spending,

    Again, bad but not the end of the world.

    Fools said>recession,

    We're going to have a recession eiither way. The difference is with the bailout we'll have recession AND hyperinflation. How's that better?

    Fools said>business failures,

    Again, bad but not the end of the world. Don't businesses fail every day? Wouldn't it be better to see a few badly-run businesses fail than have $700B worth of hyperinflation? I think so.

    Fools said>and a massively devalued stock market.

    The stock market is currently massively OVERVALUED. I don't see it as a huge problem to see some stock market deflation, especially since I have maybe $3K in stocks, since about this time last year.

    Fools said>For the average taxpayer, this means watching 401(k)s plummet and putting on hold plans to retire,

    I guess I'm not average, because my 401K has been in money markets since about 3 months ago. Anybody who is planning to retire soon and is still massively exposed to stocks is a moron and deserves to lose it.

    Fools said>buy a house,

    Oh brother. Don't tell me you really believe that, even if the bailout in it's current dubious form is approved, there won't be very much more stringent restrictions on down payment and income going forward than previously, that will for all practical purposes make it difficult for anyone to buy a house. Which is as it should be. Need I really point out to you guys that if it HAD been difficult to buy a house previously we might not be where we are now? Can you guys at least try to keep up?

    Fools said>or go to college,

    As well, college education is ridiculously overpriced. Why? Because they could. Maybe it will become more affordable again when they lose some demand due to a recession. I doubt it, but maybe.

    Fools said>and for many it will mean layoffs, foreclosure, and bankruptcy.

    Yes, that's what happens when there is a recession. It's a natural part of the business cycle. Why are you OK with the boom but seem bound and determined to try stop the bust by means of hooking the average taxpayer with $700B of national debt? Why do you think the recession, which will come even with this moronic bailout, will be better with hyperinflation? Please explain.

    Fools said>This type of crisis is not only unacceptable but also unnecessary.

    Wrong... It's necessary due to the way the markets have conducted themselves for the last 8 years. Big booms result in big busts and we're going to have that big bust sooner or later. The only real question is whether we're going to have hyperinflation to deal with as well if the bailout proceeds as you seem to prefer.

  • Report this Comment On September 27, 2008, at 4:39 PM, johnnyMMKE wrote:

    We need to be bombarding the Congress' switchboards with our obvious opposition. This is a big election year for a lot of Congress members. I just called my Congresswoman and both Senators telling them not to count on my vote if they vote yes on this bailout. Plain and simple but the majoirty need to be heard. Believe me, they listen.

    Switchboard # (202) 224-3121

  • Report this Comment On September 27, 2008, at 4:56 PM, wearescrewed wrote:

    This was passed on and fun to read

    Better plan for government bailout.

    Just a thought.

    > Instead of bailing out AIG to the tune of $85,000,000,00, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.

    >

    > To make the math simple, let's assume there are

    > 200,000,000 bonafide U.S. Citizens 18+.

    >

    > Our population is about 301,000,000 +/- counting every man,

    > woman and child. So 200,000,000 might be a fair stab at

    > adults 18 and up.

    >

    > So divide 200 million adults 18+ into $85 billion that

    > equals $425,000.00.

    >

    > My plan is to give $425,000 to every person 18+ as a

    > We Deserve It Dividend.

    >

    > Of course, it would NOT be tax free.

    >

    > So let's assume a tax rate of 30%.

    >

    > Every individual 18+ has to pay $127,500.00 in taxes.

    >

    > That sends $25,500,000,000 right back to Uncle Sam.

    >

    > But it means that every adult 18+ has $297,500.00 in their

    > pocket.

    >

    > A husband and wife has $595,000.00.

    >

    > What would you do with $297,500.00 to $595,000.00 in your

    > family?

    >

    > Pay off your mortgage “ housing crisis solved".

    >

    > Repay college loans “ what a great boost to new grads"

    >

    > Put away money for college “ it'll be there"

    >

    > Save in a bank “ create money to loan to entrepreneurs".

    >

    > Buy a new car “ create jobs"

    >

    > Invest in the market “ capital drives growth"

    >

    > Pay for your parent's medical insurance “ health care

    > improves"

    >

    > Enable Deadbeat Dads to come clean “ or else"

    >

    > Remember this is for every adult U S Citizen 18+ including

    > the folks who lost their jobs at Lehman Brothers and every

    > other company that is cutting back. And of course, for

    > those serving in our Armed Forces.

    >

    > If we're going to re-distribute wealth let's really

    > do it...instead of trickling out a puny $1000.00

    > ("vote buy" ) economic incentive that is being

    > proposed by one of our candidates for President.

    >

    > If we're going to do an $85 billion bailout, let's

    > bail out every adult U S Citizen 18+!

    >

    > As for AIG “ liquidate it".

    >

    > Sell off its parts.

    >

    > Let American General go back to being American General.

    >

    > Sell off the real estate.

    >

    > Let the private sector bargain hunters cut it up and clean

    > it up.

    >

    > Here's my rationale. We deserve it and AIG doesn't.

    >

    > Sure it's a crazy idea that can "never work."

    >

    > ; But can you imagine the Coast-To -Coast Block Party!

    >

    > How do you spell Economic Boom?

    >

    > I trust my fellow adult Americans to know how to use the

    > $85 Billion

    >

    > We Deserve It Dividend more than I do the geniuses at AIG

    > or in Washington DC.

    >

    > And remember, This plan only really costs $59.5 Billion

    > because $25.5 Billion is returned instantly in taxes to

    > Uncle Sam.

    >

    > Ahhh...I feel so much better getting that off my chest.

    >

    > Kindest personal regards,

    >

    >

    > PS: Feel free to pass this along to your pals as it's

    > either good for a laugh or a tear or a very sobering thought

    > on how to best use $85 Billion!!

  • Report this Comment On September 27, 2008, at 5:11 PM, keddie1 wrote:

    On the 425,000 for everyone over 18... .

    I like it... but the math is off by three decimal point...

    Its only $425 for everyone over 18...

  • Report this Comment On September 27, 2008, at 5:17 PM, MRWALLST08 wrote:

    Mr WALL ST. HERE…all you lemmings really have no clue about how this bailout really works…we are going to baffle you with bullsh%& about derivatives, arbitrage, swaps, mark to market, hedging, collars, shorting, naked shorting, tranches, no uptick and a whole slew of terms and conditions that will only confuse you. You really are not smart enough to understand why we need and will get this bailout since you the general public have and always will be an endless source of capital for US the super-rich and politically connected…YEAH we made another bad bet with your money however please do not fret about it, we are so good at what we do that we will make your kids and grandkids pay for it all!! Mr Paulson is just our puppet who knows the game inside and out, remember he was the top dog at Goldman Sachs for years, so he knows how to make and protect our billions of dollars of profits.His game is basically simple- to scare all of you into the bailout, DAMN HE’S GOOD. We made billions the last 6 years during the bull run after 911…WE EVEN PROFITED FROM THE 911 ATTACKS, THAT WAS PURE GENIUS ON OUR PART. What is the government going to give you for your $700 billion?? OH ya!! Another tax cut in the future, not a single dollar will go into your pocket, GUARANTEED!! So, Someone has to pay for my new castle in the Carribean, why should I use my own money when I can use yours, AGAIN!! LEMMINGS WILL ALWAYS BE LEMMINGS …

  • Report this Comment On September 27, 2008, at 5:38 PM, g2w wrote:

    Time out! More than one poster asked, who should we trust? A Congress that can't run it's own dining rooms without a million dollar loss? An investment house/ banking institution that charges us four time more than the dividend we receive? (not that we'll see many of those for several years.) Or how about those entities that gave us all of those wonderful tips that we couldn't use because of the tax laws and fine print.

    Who should we trust?

    None of them. Hang them all out to dry!

  • Report this Comment On September 27, 2008, at 6:27 PM, learningfool1873 wrote:

    First of all, I have to say that I do not (& have not for years) trust any politician anywhere, about anything, at any time - if they weren't crooked when they got into office, they become crooked in a very short time! I'm beginning to think anyone in any government is untrustworthy, too. NO ONE should be allowed to pay any govt. employee, i.e. lawmakers, to do favors. It should all be out in the open; I believe a large part of our problems started when lawmakers got in bed with those who lobby for various things. If it can't be out in the open, it's probably not good for the general public!

    How about having some of the ultra rich, i.e. CEO's who have gotten golden parachutes when they either retired or were fired, put up some of the millions they got; they have it to spare. Ordinary people don't have squat any more; they're the ones trying to find the least expensive food, clothing, etc., because they can't afford anything else.

    Congress didn't want to increase the minimum wage (their business buddies would have to pay higher wages & wouldn't be able to make as much profit - never mind that it would help the worker be able to feed & clothe his/her family!), but they sure didn't miss voting themselves a raise!!!

    As far as "cutting corporate taxes" to help the economy, there are lots of companies that don't pay ANY federal taxes at all, even though they make lots of money, all due to loopholes that need to be closed! How can you cut zero taxes any farther (unless you want to pay the companies to do business)???

    Face it, the rich will get richer & the rest of us will get poorer no matter who wins the election. The rest of us are the ones who will bear the cost of whatever happens.

    BTW - How come the government just ignores the worker who has run out of unemployment benefits & is still jobless - they sure don't count those people any more; if they counted them, unemployment would be much higher than what the government says it is!

    The day may come when there won't be enough people still working (since so many of our jobs went overseas) to pay any taxes - Medicare, Social Security, etc. - so there won't be enough money to pay Congress's paychecks. Maybe that'll get their attention!

    There's a lot of talk on the boards about not being able to retire when you want because you will need the paycheck - what about those of us who are already retired & living on a fixed income? Inflation, etc., is staring me in the face & I don't like what I'm seeing, but there's not much I can do about it. I know - look for a job - but then I'd be competing with someone with a family who needs the job. Actually, I'd probably be competing with someone in India or ? because the job I ended up with (after the original being out-sourced to cheaper people here) was sent overseas. Now I have to try to find the cheapest products I can find just to exist, which doesn't help companies who actually keep jobs in America, because the prices for their products are higher & I can't afford them!

    THANK YOU, NAFTA!

  • Report this Comment On September 27, 2008, at 6:50 PM, turnipseedtales wrote:

    MF is right on this one folks. There is a crisis in the short term credit market and in confidence. If a panic develops a lot of good business will be taken out with the bad and we could go into a real depression. This is a classic case of save a penny, loose a buck. Here's a good link to a summary of the present situation.

    http://www.investorsinsight.com/blogs/thoughts_from_the_fron...

  • Report this Comment On September 27, 2008, at 7:34 PM, jaymichaelodell wrote:

    Dang, I was off by 10 to the third. I'd like to thank everyone for the math lesson. I deserved it. "No wonder I got a C- in applied math."

    Warning: Hopeful observations follow...

    My paper losses this year are drifting upwards. Since I have not sold anything, I feel fine. But, I may work until, I keel over at my desk. I have no skills as a barista, but I suspect that may be my final job opportunity. Working forever doesn't scare or bother me. I can't think of a better country to do it in.

    After reading though this, I think this issue may take some time to resolve. I think it is too bad this is an election year. Everyone in government is trying to do something to show they have their arms around the problem. I shudder to imagine what we end up with. Still, I think it is inevitable that our leaders try to do something, and also inevitable that we praise or curse them for their hubris or success. It is also inevitable that they will spend a trillion dollars doing it. Let's all relax and start looking for buy opportunities in a down economy.

    Business without morality can be very evil. Historically the market teaches us lessons in a painful way. Bad businessmen end up sitting in a bar telling war stories about the golden age. A harmless and boring behavior.

    My worry is that it is impossible legislate ourselves out of stupid greedy behavior. I wonder what we as a culture will learn from this. I think learning from this is our best hope for the future.

    If Culture equals Values Plus Behavior, I think we should be discussing our values and behaving in concert with them.

    I want us to build a model country to lead the world. A country based upon fairness and opportunity.

    The rules should be loose enough that the poorly behaved business can fail, and transparent enough that we can decide not to invest in poorly behaved businesses.

    My 2.3333 cents. Just add it to the trillion we will spend.

  • Report this Comment On September 27, 2008, at 8:13 PM, Imaginos1888 wrote:

    Why of COURSE we must give that gang of greedy corrupt irresponsible bastards a 700 billion dollar reward for creating this mess, and force the people they ripped off to pay it. And of COURSE we must leave those same scoundrels in charge. And we must do it immediately so they don't miss out on their next billion-dollar stock option! How could anybody doubt the obvious wisdom of our elected leaders in proposing this brilliant solution? I'm surprised at all of you.

  • Report this Comment On September 27, 2008, at 8:15 PM, megalon81 wrote:

    My first e-mail message to my representatives was "Go slow! No blank check!" I was angry that I might be forced to reward foolish to unethical behavior to the detriment of good businesses. But I did a lot of very fast homework. Very much against my will, I became convinced that a bailout was necessary. The tipping point for me came when I recognized the problem of banks not lending to other banks, which threatened lines of credit. I disapprove of companies that rely on lines of credit, and I wouldn't invest in one. But I have worked for several. While the local and regional banks in my area are generally sound, they need short term, overnight loans to keep lines of credit open. Without lines of credit, mid-sized to rather large companies will fail, jobs will be lost, etc. And we have few enough viable employers in Appalachia as it is.

    So, I e-mailed my representatives yesterday to support the bailout plan in its most recent form. Sorry, pure capitalists. We need to avoid a crash landing, if this is at all possible.

  • Report this Comment On September 27, 2008, at 8:25 PM, spflw wrote:

    You can't call it fraud. This took place in full view. I've seen numerous reports for several years warning of what would happen when housing prices dropped and the economy turned sour and people with subprime interest rates had to make higher payments. No one made a real effort to stop it, but it was there for all of us to see. Enjoy the bail out we earned it.

  • Report this Comment On September 27, 2008, at 9:23 PM, realitycheck13 wrote:

    Your Tax Dollars at work.

    Looks like the United States isn't going to worry about hitting $10 trillion in national debt. They're going to skip 10 and go straight to $11 trillion in debt with what the government is planning on spending with these so called bailouts.

    Welcome to the socialist, with a tinge of ....

    great article on the bailout - scroll down a little ways to read it.

    http://www.mortgagebreakdown.com/news-archive.aspx

  • Report this Comment On September 27, 2008, at 9:26 PM, keddie1 wrote:

    Thanks for jempsall for posting the first article that treats the reader as though they have intelligence and puts some real numbers on the size of the crisis... not a lot.. but its a darn sight better than the capitol hill "we need 700B please" explanation...

    Banks leverage their capital 12 to 1.... if they loss capital then they have either raise capital or reduce lones until the leverage ratio is back within the 12 to 1 limit..

    If something is not done, unemployement will rise above 6%...

    It also says that even with the bailout there will be some amount of recession... it just will not be as bad as the whole bottom dropping out...

    It also explains how the bottom falls out...

    ok... why didn't Congress and CNN just tell us this.... ?

    Now.. if this is the case.... can't we the tax payers take over the ill-liquid assets at 12 to 1...?? that is... about 8 cents on the dollar.... This then will bring the banks back in line with the required 12 to 1 ratio.... Once the banks are back inside the 12 to 1 ration and they've had a chance get these funny papers off their books... .if the theory is correct.... then investors should inject cash into these cleaned up institutions allowing to then make loans 12 times the amount of cash injected...

    This being the case since the Omaha guy put $5 billion into GS... shouldn't GS be able to make loans in the amount of $60B dollars now... yes?

    That being the case does it really take 700B to get things rolling again....??

    Ok... i'm buying into what the problem is with the credit market and why it is...

    I'm not buying into the 700B number....

    So these folks who are walking off with the Golden Parachutes are really making the problem far far worse.... The WaMu guy walking off with 31M dollars... if the 12 to 1 rule is right .. he in effect ... reduced lending ability by 372 million dollars as a result of his golden parachute...

    That's 1/3 of a billion....

    The golden parachutes and bonuses are in fact part of the problem....

    anyway... thanks for tracking down the article...

  • Report this Comment On September 27, 2008, at 11:35 PM, MRWALLST08 wrote:

    Keddie1

    Actually the investment arms of the banks and investment banks are levered 30-40 to 1...12 to 1 is managable in a downturn but 30-40 to 1 is phenomenomaly profitable in a bull market and a catastrophy in a bear market when they have no one to unload that bad paper onto...current count is 10,000 homes per week average and no bottom in sight

  • Report this Comment On September 28, 2008, at 12:07 AM, keddie1 wrote:

    That being the case then the WaMu guy walked off with 1.2 Billion of the lending power.... double ouch.... then if the new owner payed 1.8 Billion that means their lending power is reduced by 72 Billion.... ok.... Course that means that Billy Gates could rescue at least one bank.... hmmmmm.....

    anyway... thanks for your input....

    So I get how these folks end up stuck... and I can even seen that some of the banks may have not done anything wrong and they got pulled in...

    I still like to know the probability of the 700B purchase of ill-liquid assets turning the right trick and restarting the system... and then...

    What has to happen to make sure that we don't end up here again.....

    After the great depression we did learn ... and so controls were put in place to reduce the chances of another one...

    over time the margin requirements for participating in the stock market have been adjusted to keep things in line...

    we've also made some adjustments to deal with on-line trading and so forth...

    so what's the magic preventative for this deal??

  • Report this Comment On September 28, 2008, at 1:00 AM, slw99 wrote:

    Howie, whare are you when we need you? "Deal, or No Deal?"

    I am an avid listener and subscribe to the theories of Warren Mosler and his most intelligent protege, Michael Norman, the 'Economic Contrarian' of Biz Radio. If you listen t these two gentlemen, who have an objective take on our economic crises, you will educate yourselves in the calm, non-partisan, solution-oriented perspective of these two stalwart economists.

    The members of Congress would do well to stop talking and start listening to 'my guys' in the morning.

    None of this will, nor does it need to be a threat to be a cost to the taxpayers. These two men and the guests on this program have made incredibily sensible. logical alternatives that can be a means for lifting our nation out of the debt of this corrupt morass, created by greed, stupidity and in-action.. As Pogo has wisely stated: "We have met the enemy and it is us."

    SLW, The Woodlands, TX

  • Report this Comment On September 28, 2008, at 1:41 AM, ForthFool wrote:

    Nicely put SLW99.

    If "we have met the enemy and it is us", then we must fix it and make sure it doesn't, nay, can't happen again.

    For the capitalistic puritans who make the point that it is socialistic to accept government intervention I must ask:-

    How can one practice capitalism when, in a world depression, there'll be hardly enough to eat let alone any spare capital to go around?

  • Report this Comment On September 28, 2008, at 1:49 AM, RaulChapin wrote:

    Here is an idea: How about the 700Billion be given out not to the failing banks, but to the ones with clean respectable balance sheets. Let them buy the failing banks out.

    Save the economy, reward the good banks!

    The good banks will not buy the toxic loans that the bad banks want to dispose of. They will buy the good ones at a discount and make money on them.

    If the complaint is that housing debt going bad was the cause of the problem, why provide relief to the failed homeowners. Loan the money to the homeowners who have not failed, allow them to own two houses and rent to the ones who failed. They will make a profit and the economy will grow.

    This would not buy votes, but it would be sane... see you all on Monday, when the bill has been passed, much to the detriment of the decent people and successfull banks.

  • Report this Comment On September 28, 2008, at 2:32 AM, shakeOEFOIF wrote:

    Sorry, I've been defending our country, so I'm a litlte out of the loop. Why do I return from war to find the country I fought so hard for has completely lost its mind? Private banks, automotive companies, insurance companies, and whatever private institution should no way be "bailed-out". It appears as if everyone is in a complete panic cuz their protfolios lost 30 percent. They should have known that nothing is certain and no institution is "too big" to fail including the United States Government. I guess maybe I should have been defending taxpayer rights and not freedom.

  • Report this Comment On September 28, 2008, at 5:23 AM, westernfront wrote:

    Come on, this was not about saving the economy. This thing is the 21st Century successor to the New Deal, the Fair Deal, and Fannie and Freddie as the Democrat vote-buying/fundraising/high-tone employment agency for well connected fellow travelers/sweetheart behind the scenes lender to the party leaders. Schumer knew. Two or three circling vultures (Warren Buffett, for example) and a wiff of large body capitalist carrion and Chuck was galloping his pack of socialist jackals right to the caracass, beating off the wall street lions who brought it down, and claiming it in the name of everlasting justice and fairness. Republicans stood by, wide eyed, again (except for uber cynic Bob Bennett, who as always, knows a dinner bell when he hears one, and will surely be at the scraps when the bones have been picked bare). As with the new deal, Republicans, enterpreneurs, and mainstreet businessmen, will be caged in back walks of the Washington Zoo, on display mostly as curiosities, trotted out on occassion to frighten children about what happens to you if you even so much as pretend to take care of yourself instead of looking to big brother. And we, the ants, who worked, saved, paid our debts, and invested in free markets (naively, it would seem) will watch for two generations as swarms of Grasshoppers (Democrat special interests) devour the fruit of our labor like locusts.

  • Report this Comment On September 28, 2008, at 6:29 AM, skypilot2005 wrote:

    What about all of the "extras" the Democrats have added to the legislation?

    For example, the Democrats want A. C. O. R. N., an extremely radical left wing group, to get millions of dollars. That has been added to the legislation. It needs to be stripped out.

    Democrat operatives like Mr. Raines caused this problem. They need to fix it, honestly.

    I think Mr. Schedler is being very naive.

    I am against the bailout, have called my house representative and asked him to oppose it.

  • Report this Comment On September 28, 2008, at 9:32 AM, Bluzulu wrote:

    Credit is illegal....PERIOD!!! It always has been. People have been duped into believing that credit is legal for years. A financial institution CAN NOT lend money to an individual WITHOUT some means of collateral. When most individuals obtain credit from financial institutions do they ask for collateral? ABSOLUTELY NOT!!! Not only is the money non - existent, but then they expect YOU to pay back this invisible money at exorbitant rates.

    I say...let them burn!!! Sue the credit card companies, banks and all these other crooks for fraud, or file for bankruptcy and let them clean up their own ILLEGAL, greed induced mess.

    I also wanted to comment on this:

    lease note, we are not advocating long-term government ownership of this equity. At some point down the road, the government should be required to liquidate its equity position in the recovered banks, but this is a detail to be worked out later.

    This is a detail to be worked out later?

    Are you out of your minds?

    I want this in clear, concrete writing just EXACTLY what these civil servants are planning to do with MY government. This government WORKS FOR YOU...not the other way around. You demand that they tell you what they plan on doing with YOUR money.

    This whole incident sickens me beyond belief.

    Lend, lend, spend, spend...

    CRASH BOOM DIE!!!

    You keep going the way you are that's pretty much going to be the way it is. This is an empire teetering. It's just waiting to crumble.

  • Report this Comment On September 28, 2008, at 9:35 AM, keddie1 wrote:

    About A. C. O. R. N.

    I don't think that the term A.C.O.R.N. is actually in the bill. The group was used as an example to show that the term of the bill as written allow for money to flow in unpredictable ways... There is nothing in the bill specifically calling out this group..

    This little bru ha ha started with a one page summary statement from Frank.

    Here's the reference sighted by CBS News at

    http://www.cbsnews.com/stories/2008/09/27/politics/politico/...

    Its an example of what could happen as an unintended effect of the bill... not an allocation of funds to the group.

    ---

    And here's Frank's one-page summary of the Affordable Housing Trust Fund and to find the relevant bill go here and search for H.R. 2895.

    State and local governments can then dole out the funds and could send money to ACORN if they so choose and if the organization's efforts meet the standards set out in the law. For their stand against the provision, Adamske tweaked House Republicans, who have long called for more state control of federal funds.

    ---

  • Report this Comment On September 28, 2008, at 10:26 AM, 32dPyr wrote:

    Crisis?

    Fear Mongering? Hurry or else the sky will fall. No time to think too much about it. My name is Paulson and Oh, yes I made Millions at Goldman Sachs.

    No, Paulson is not biased, surely he is looking out for me.

    Why does this scenario sound all too familiar? Oh yes, the run up to the Iraq War. Are you fools going to tell me Weapons of Mass Distruction have been found?

    Why on earth should I buy into any of this nonsense?

    Why should we save this system? Who says a replacement system wouldn't be better? Shouldn't capitalism be able to handle this by letting (no insisting) the weak die, thereby, creating room for the stronger? I vote for the harsh lessons of life and no bailout. Kill off the weak in favor of a stronger system in the future. This bailout will not serve our children and that is what truly matters the most.

    If u want to see a congressman that is speaking for the "non-wealthy" see Representative Kaptur on You Tube.

  • Report this Comment On September 28, 2008, at 10:35 AM, mikepukmel wrote:

    Boy, for the first time in a while you guys are COMPLETELY out to lunch. The entire "fiasco" was created. First, look at the M3 numbers. FOR THE FIRST TIME IN DECADES M3 is dropping like a stone. Do you think that it is a coincidence that the Fed decides to stop publishing M3 numbers a year before the whole house of cards collapses? You have to go to private sources to see the hideous decline in M3. Have any idea what could be causing this? And, didn't the Fed say, many times, that FNMA and FHLMC are 'doing just fine and well capitalized', in the beginning of 2008? Didn't they say all's well with the economy at the beginning of 2008? They why did M3 drop for 6 months before the "collapse" that is such a bloody crisis now?

    http://inflationdata.com/inflation/Inflation_Articles/M3_Mon...

    Second, the Fed is blasting out reverse repo agreements, draining liquidity from the system.

    http://www.reuters.com/article/marketsNews/idUSNYG0013212008...

    I expected a lot more from you guys. This whole thing was a huge setup from the beginning to defraud the American taxpayers out of trillions, and you're singing right along with the crooks.

    I'll tell you what: a handful of the very rich knew very well what was happening, because they set this thing up. The Fed stopped printing M3 because they knew it would send alarm bells (at least to anyone that has 1/4 of a brain left). The fed has been draining liquidity from the system at exactly the time they're telling us that we don't have enough liquidity.

    As far as collapse goes, let the whole damn thing collapse, and we can start over.

  • Report this Comment On September 28, 2008, at 11:29 AM, keddie1 wrote:

    M1, M2, M3 / Reverse Repurchase.

    Thanks for posting the reference to the two articles. Quite informative. Besides explaining what the measurement are, it points out that an important job of the FED is to keep the money supply in balance with the amount of Goods, Services, and Wealth in play within the economy... If the money supply is slightly larger than the amount of goods/services/etc. then it encourages inflation. If the money supply is slightly smaller, then it encourages deflation.

    On one hand we have housing prices dropping like a rock... on the other hand energy prices soaring like an Eagle... and the Eagle was complaining on both counts...

    so what happens if the FED starts manipulating the money supply to affect prices... rather then focusing on keeping the supply in balance?

    Interesting stuff

    thank you.

  • Report this Comment On September 28, 2008, at 11:50 AM, keddie1 wrote:

    They are going to post a draft of the rescue plan on the internet at noon today. They expect over a million of us to read it...

  • Report this Comment On September 28, 2008, at 12:28 PM, FOOLBEFREE wrote:

    I have emailed my respective house representative and senators.

    I have asked them to vote yes on the financial rescue package as long as the taxpayers receive equity on rescued financial institutions.

    This way we hope to reduce the cost to the taxpayer and repay this debt.

    Thank you very much Fool.com for organizing

  • Report this Comment On September 28, 2008, at 12:34 PM, FOOLBEFREE wrote:

    Equity for taxpayers will be included:

    Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets

  • Report this Comment On September 28, 2008, at 12:53 PM, Z1chopper wrote:

    I say no to the bailout.

    Worked 20 years and just lost 150,000 shares because the company got sold for pennies on the dollar. Their goes my retirement money. Is anyone going to help my family. Hell no.

  • Report this Comment On September 28, 2008, at 1:53 PM, marbry wrote:

    I will defer my preferences to that of Mr. Nouriel Roubini the economist. Mr. Roubini has been prescient in his analysis of this crisis for over two years and has a much better understanding of the workings of our economy than I.

    His remarks on this subject are here...

    http://www.rgemonitor.com/roubini-monitor/253783/is_purchasi...

  • Report this Comment On September 28, 2008, at 2:33 PM, jpsandscl wrote:

    my last rejoinder to all the "free market" commenters above- a market is only truly free when all players have access to equal, truthful, complete and factual data.

    First, I would say that certainly does not exist in our markets. The only reason it exists at all is because the regulatory framework that does exist mandates certain disclosures from publicly traded comnpanies. These disclosures would absolutely not be forthcoming if not required by law. They were not so before the law made them mandatory.

    Second, even where disclosure is required by law, there are many very powerful players in the market who act based on superior knowledge that the rest of us will never have access to. I am talking about the ability of a CALPERS manager to call any company and talk to the CEO at any time they like because of the weight they throw around in the market and what would happen when they start moving their enormous reserves from one investment vehicle to another. There are many players in this league, including mutual funds, etc. We are left with crumbs. You try calling any CEO and see how far you get!

    Third, we are also beholden to decipher exactly what companies are telling us in their arcane and obfuscatory ways (EBIDTA??? give me a break!!!) Companies really don't want people to know facts and the truth. They want people to believe their propaganda. And for everyone who thinks the shorts are all knowing and incisive and protect us from these company lies, I say they are just gamblers hoping to profit from a roll of the dice. I admire Warren Buffet for many reasons, including his clear, open and apparently honest annual reports and filings for Berkshire.

    If we can't rightfully know what is happening at any given moment in a company, then there is no way to correctly price their stock. Many who try based on financial reports and public statements from companies have gotten and will continue to get burned as stocks find their "true" value once corrections have been published and overly aggressive future looking statements have been shown to be false.

    How exactly is any of that a "free market"?

  • Report this Comment On September 28, 2008, at 2:34 PM, jester112358 wrote:

    Sorry guys, I don't buy it. You have a vested interest in a bailout that we debt-free people don't. Namely, you're in the financial services industry and if the market tanks, your newsletter services and this site will generate considerably less income via advertising. I've got real skills in science and technology that I can barter to survive quite nicely. The US is in the "debt exporting" business and we need to start actually working and doing real things. Too many lawyers, MBAs and not enough engineers is our problem. Maybe we all have to adjust to the stupidity of early retirement, buying an RV to tour the country while squandering our last hydrocarbon resources or just playing golf while living off the exploitation of workers in China or exploitation of the next generation is morally bankrupt. Let the bad part of the financial services industry die so we can recapitalized and reindustrialize and start exporting real goods and services for a change. The gig on living on credit is up, get used to it. Frugality is the future!

    Lets take our overspending medicine now and get it over wtih and learn something from Japans failed attempt to bail out real estate and banking speculators.

    Besides, this plan cannot work out since no one knows how to value these bad MBS and CDOs. That's why there's no market and they're illiquid!

    I'm writing and faxing my reps letting them know they will be out a job come Nov. if they support any use of taxpayer money to buy "junk bonds". Let the "junk bond holders" like China and Japan see what they can get for their junk bonds on the open market.

  • Report this Comment On September 28, 2008, at 3:25 PM, Keegan07 wrote:

    Spend our tax dollars and increase the national debt while induced inflation reduces the value of the money we are left with. So that we can keep ill-managed businesses afloat and prolong the agony.

    The government should be educating its people on how to live below their means, not showing them how to rack up more debt (bad debt).

    Wake up America!

  • Report this Comment On September 28, 2008, at 3:34 PM, keddie1 wrote:
  • Report this Comment On September 28, 2008, at 4:03 PM, notfooled12345 wrote:

    This debate is purely academic and boring.

    Lady liberty has slit her own throat and the only posible outcomes are death or permanent disability.

    The Politicians will sweat, posture and acuse, then agree to stuff a large ,hot wad of cash into the wound.

    This may delay the eventual but will not deny darwin.

    Liberty without decency, Freedom without intelligents,Greed without balance and arrogance without peer will be rewarded apropriately.

    notfooled123

  • Report this Comment On September 28, 2008, at 5:09 PM, npkr wrote:

    If you want to see Barney Frank confess his contribution to the present financial crisis, go to: http://www.taxfoundation.org/blog/show/23617.html

    You won't believe it!

    If you watch the tape, go to minute 4:40.

    I wonder why the unbiased news media is not covering this?

    I guess the democrats idea of lending money to those that they knew couldn't afford to pay it back, ie, Fannie Mae and Freddie Mac, was a bad idea after all. Affirmative action housing! Terrific!

    In case you have not heard, with the proposed bailout deal they are considering, not only are the banks being bailed out, but the congressional democrats have tacked on some goodies for their constituents in the form of "mortgage relief," ie, we get to pay the mortgages of those who are irresponsible "to help 'homeowners' stay in their homes." Newsflash: if you can't afford to pay the mortgage on "your home" it's not your home. It's the banks.

  • Report this Comment On September 28, 2008, at 5:40 PM, keddie1 wrote:

    You're right.. we democrates got that in into the bill.... YEAAAAAAAAA!

    Ok.. the bank owns the house if the home owner defaults on the mortgage...

    well.. .sort of... what the bank is intrested in is collecting the remaining principle from the equipty in the house....

    that means foreclosing.. which consumes money and time.... then eviting the defaulting home owner... then fixing up the home and putting it on the market..... finding a new buyer and so forth..

    That assumes that there are buyers lined up for these homes...

    In some places there are.... but more and more .. .there are not.... They are simply not going to get the money back out .. and in many cases the bank ends up going further into debt in the process of conducint the foreclosure...

    What I thing that part of the bill says is that the secretary is to ... where possible.... assist in converting "Avoidable Foreclosures"...

    The principle is...

    let's skip the foreclosure process.... pretend like we did....see how much we can sell the home for on the open market... and if the family that is currently in the home can afford that smaller mortage... then let's reset the mortgage and let them keep that home..

    That means they are continuing to pay school and property taxes.... spend money in the local stores.... and take care of the home so that property values are not hurt by a lot of empty houses...

    Yes.. they people defaulted... yes they got in over their heads... but realistically there are few buyers for these homes... which is why the mortgage paper is ill-liquid and we the tax payers are ending up owning it... because if the home were worth the remaining principle.. then yes of course ... toss them out into the street and get the next buyer..

    But simply is not the case...

    yes... we democrates want to keep families that have some ability to pay... in their homes...

    ---

    I do see your point if the neighborhood has people lined up to buy the house...

  • Report this Comment On September 28, 2008, at 6:04 PM, npkr wrote:

    To... Keddie1...:

    Thank you... for your... long-winded attempt...at pointing out... the obvious. Sounds like... you said we... are stuck paying... the mortgages... of those who are... defaulting.

    If you can't pay your FULL mortgage payment, then you are still in default. Most people who default on their home loans have SOME ability to pay, they just can't pay the entire amount they agreed to pay. That is still called DEFAULT. The rest of us would lose our home if we did this. The irresponsible people who took these mortgages should as well.

  • Report this Comment On September 28, 2008, at 6:18 PM, keddie1 wrote:

    ok.... throw them out... who do you sell the house to??

    See.. that's the difference... in order for the foreclosure process to work there has to be Buyers ready to take the house...

    In some cases there are....

    But in more and more case .. there is NO BUYER...

    What good does it do to foreclose under that circumstance... foreclosure which COST the mortgage holder MONEY.....

    and the mortgage holder is????

    We the tax payers...

    ---

    I agree with you when there are buyers willing to take the house..

    --

    smiling ... and yes.... I am long winded.... apologies...

  • Report this Comment On September 28, 2008, at 6:26 PM, oaklahoma wrote:

    The markets need to fail in order to correct the over inflated bubble. Let the free market system work!

    The reason the landing is so hard is because of all of the previous intervention in the market over the past 20 years. Every time government gets involved, we postpone the correction and the bubble gets bigger. This time is no exception and we have to face the hard fact that the financial system is long overdue for big correction.

    Let it fail. Times will be tough for a while, but we'll reach a point where we can rebuild. Don't feed the fat cats!

  • Report this Comment On September 28, 2008, at 6:55 PM, notfooled12345 wrote:

    keddie1,oaklahoma,npkr.

    please see 28 2008 4;03 and tell me I am wrong.

    Throw me a bone here.

    Respectfuly,notfooled12345

  • Report this Comment On September 28, 2008, at 7:53 PM, keddie1 wrote:

    Notfooled12345....

    Agreeing or not agreeing with you depends on where one is in life....

    - This debate is purely academic and boring.

    I find this whole event very interesting... the outcome does directly affect me: some stocks, a 401K, IRA, and other small investments that make up my retirement and I certainly have seen if shrink over the last year. so its not boring - to me.. I have friends who could care less and they pay no attention.... each of us have to decide if we want to pay attention ... or not... I do...

    I don't think that it is completely academic. I do agree that it is very hard to understand how this all affects us ordinary folks and why we should care.... you have to dig pretty deep into the muck and mire before finding a direction connection... Congress, the Media, the Administration are not making it easy because they speak in vaguaries meant to scare us so we go along with us... Not unlike how the war lords ran the dark ages... Getting us common folks to understand the real underlying principles is what stops and defeats "fear mungering".... its how they got out of the dark ages...

    I believe that Congress was strongly affected by the thousands and thousands of emails, phone calls, and letters that we common folks have sent to them....

    so believe it is more than academic...

    - Lady liberty has slit her own throat and the only posible outcomes are death or permanent disability.

    Even Paulson states that if the Bail out is done, that the US economy will continue to shutter, shake, and occasionally convulse ... if not out right seizure.... some banks will still fail... businesses will close... and people will become unemployed..... people will lose their homes... What he is "hoping" to achieve with the bail out is to stabalize the financial system sufficiently that it can handle that with a great deal less tweaking on the part of the FED and the Treasury...

    - The Politicians will sweat, posture and acuse, then agree to stuff a large ,hot wad of cash into the wound.

    The Senators and Representatives admit that this is the case... they will fuse, fume, posture, and speak their peace... In the end.. when it comes up for a vote... it is likely to pass....

    - This may delay the eventual but will not deny darwin.

    I believe we will still have a recession ... hopefully not as bad as it was going to be... we'll see....

    - Liberty without decency, Freedom without intelligents,Greed without balance and arrogance without peer will be rewarded apropriately.

    This is a variation on the corralaries of Murphy's law...

    Punish the innocent and reward the guilty..

    The rich get richer.. .the poor get poored... and the middle class to some extend is slowly being trivialized... that's why I became interested in the Motley Fool .. .because it is a way to keep from being trivialized...

    I'll give Bush that his programs creat jobs... its just that they don't pay as well as the jobs that were lost in the first place...

    I'll give Bush that goods are cheaper.... but because they are made in Asia...

    I'll give McCain (who I respect as a patriot) that the American working is amoung the most productive in the world.. but they don't necessarily share in the wealth that the productivity creates...

    all variations on Murphy's laws..

    respectfully

    keddie1

    notfooled123

  • Report this Comment On September 28, 2008, at 8:06 PM, daveyw2 wrote:

    Someone above wrote "The fed has studied these crises and various possible responses. The proposal has the most sound economic support. It must be done quickly."

    The thing is, the FED is the problem. Do some research on 'Austrian School of Economics".

    Economists that follow that school of thought saw this all coming do not recommend the bailout.

  • Report this Comment On September 28, 2008, at 8:16 PM, daveyw2 wrote:

    More on the above, take a look at

    http://mises.org/story/3128

  • Report this Comment On September 28, 2008, at 8:55 PM, Foolishest100 wrote:

    Just a couple of comments on this mess;

    In opposing any limitations on these beyond-reason "golden parachutes" I've heard the argument that without companies granting them, they wouldn't be able to attract the best chairmen and board members. Do they mean that, without giving multi-million dollar goodbyes, they couldn't attract people like the ones that have driven companies to financial disaster? I'm not a consultant in such matters, but I'm sure I could find for WaMu a board chairman who for a modest $40,000 per year could ruin their bank for them, instead of the inept gentleman who charged them 40 million for doing the job. Just hire a night manager for the nearest Burger King.

    My commission for this advce is a mere 1% of the $39,960,000 this will save them. Cash please. No check.

  • Report this Comment On September 28, 2008, at 9:22 PM, notfooled12345 wrote:

    keddie1.

    Your opionions and insight lead me to believe that either ...

    (I know how you like the ... thing)

    you are grotesquely more intelligent and informed than I...

    or you are the voice of a (your words between) capitol hill damage control team.

    Thank you for your brilliantly considered reply and inpute.

    Respectfully,notfooled12345

  • Report this Comment On September 28, 2008, at 9:25 PM, rlgillett wrote:

    I would have no problem with this bail out if it came with a balanced budget ammendment; the elimination of the current tax structure and an implimentation of a flat tax or a consumption tax (i.e. "fair tax"); and the ouster of all tax and spend politicians regardless of party affiliation. This would turn over 80% or more of congress and probably eliminate both current presidential candidates. It is time for mature fiscal responsibility out of Washington instead of spending like a teenager. I am very angry with our government and its financial regulations, spending and lies. I am also offend by a whining majority of americans who want the government to be their personnaal nanny. It is time we all grow up!

  • Report this Comment On September 28, 2008, at 9:33 PM, rlgillett wrote:

    I also am angry that the american people can not see that most of the problem is the socialistic power grab that has been happening and is in full swing in this bail out. I wonder can we limit the amount of money a politician makes both from their salary and outside sources? How about a $100,000 cap for them? Or lets say they can make no more than the median wage in America? They want to cap wall street executives incomes, but I bet they will raise their Senate and House salaries the next time it comes up for vote.

    Caping salaries is a Socialistic/Communistic policy you would find in the old USSR, current China, and other such regimes. Let me ask the American public: Who shoud decide your income? You? or Who?

    I vote for Freedom. The freedom for the citizen to earn what he can with no caps artificially placed on them.

  • Report this Comment On September 28, 2008, at 9:39 PM, charlie4550 wrote:

    why is it? If i do something wrong ,I have to

    pay for it, we government does something wrong , I have to pay for it.

    The people who were responsable should have to pay for it. Dodd, Rangle, the regulators, ect.

    There should be no golden parachutes

    no million dollar paycheck for over seers of the buyout.

    Most importantly, no more government spending.

    We can't help anyone out if we can't pay our bills.

    NO 1 billion dollar payment to mexico to help them fight drugs in mexico. ECT.

    Lower captial gains tax. LOWER CORPORATION TAX to ONLY COMPANIES WHO STAY IN AMERICA, AND HIRE ( AMERICAN) WORKERS )

    NO BENEFITS FOR ILLEGALS

    LIMIT NUMBER OFIMMIGRANTS WHO CAN COME HERE. $ 10,000 PER YEAR

    iT IS HARD TO COMPETE WITH WAGES oF 7.00 HOUR AND i HAVE BEEN IN BUSINESS FOR 25 YEARS

  • Report this Comment On September 28, 2008, at 9:40 PM, nmartin wrote:

    This longtime Fool is very disappointed with your recommendation to support this nonsense. There must certainly be a Plan B that does not involve government. And please read Atlas Shrugged!

  • Report this Comment On September 28, 2008, at 10:17 PM, keddie1 wrote:

    About caping salaries...

    Although the news media have been reporting that the latest version of the bill contains a salary cap... I believe that the text doesn't really do that...

    What I think the text says is that compensation up to $500,000 is taxed normally ... and compensation for the "senior executive" above $500,000 is treated differently... specifically they can't claim deductions against the compensation above the 500K threshold... so their salary is not really caped..

    If they have an existing contract with a Golden Parachute then as long as the firm doesn't fail, they can collect the Golden Parachute..... if the firm fails, and has participated in the bailout, then they can't collect their Golden Parachute...

    Senior excutives hired into a firm on or after the date that the firm starts to participate in the bailout (actually "Stabilization Plan") can not have a Golden Parachute clause in their contract....

    ----

    I don't think there is a compensation cap in the bill.... only a special treatment of compensation above $500K for executives of firms that are using Tax Payer Money as their financing....

    The US has in the past imposed salary, wage, and price "freeze" (not just a cap) for several years.

    In light of that, what they are offering the wall street senior execs is quite generous...

    ----

    another way to look at it...

    The US Tax Payers become part owner of any firm that participates in the bailout... as part of the deal, the Paulson team get some oversight of the firm.... sort of a silent partner on the board....

    in any other company the board does decide what the compensation package is for the top executives.... that's what's happening here... it is directed at the senior executives... not the rank and file workers..

    ---

    I'm not good are reading this legal and legislative mumbo jumbo.... so if someone else can offer their opinion of what Section 111 - Executive Compensation, really means, I'd aprreciate it...

  • Report this Comment On September 28, 2008, at 11:25 PM, jpsandscl wrote:

    Ayn Rand! Give me a break! What an insipid moron. And so was her chief acolyte Milton Friedman. We are seeing the culmination of this line of thought in the rapid decline of the American middle class standard of living. If you really believe that we are all best off when we a live fully out for our own interests with no regard for others (her philosophy), then I hope you will never call the fire department when your house is on fire and never call the police when someone has burglarized you and never call on the military to protect you from foreign threats. All of these are communal government services. Bunch of hypocrites.

    Give me Keynes and FDR any day! I really think I wasted my money on Motley Fool. Bunch of Day Traders!

  • Report this Comment On September 29, 2008, at 12:05 AM, kemolledog wrote:

    Question...........Would you rather have an earthquake..........or a mudslide.......

    Right now, it looks like we've opted for the mudslide.

  • Report this Comment On September 29, 2008, at 3:32 AM, hardmanb wrote:

    NO to this particular bailout.

    YES, if it was to refinance the salvageable mortgages to stop the foreclosures and cure default of citizens.

    But NO if it is to save the investors, speculators, Wall Street firms, CEOs, and increase the power of the Fed and Fannie Mae and Freddie Mac who created the subprime mess that caused this crisis.

    YES, if the investors, Wall Street, derivatives, mortgages and credit defaults are rescued only at 50% of value, to share the risk and pain of the bailout.

    NO, if it involves buying these fraudulent instruments at 100% of their value, rewarding those responsible.

    NO, if this $700 Billion bailout can be followed later with another multi-billion bailout when "more fix is needed".

    Sorry...rescue the people...not Wall Street. This is a trumped-up crisis to ram a hasty and bad "bailout" down our throats. We need a carefully considered "Workout"...not a panicky bailout.

    I don't trust Congress (who caused this) to solve it. They will just bail out their GSE contributor friends...at the expense of the taxpayers.

  • Report this Comment On September 29, 2008, at 6:59 AM, kemolledog wrote:

    If the Folks at the Federal Reserve claim they did not see the Subprime problem coming, how in the world can we trust them to "Fix" this current mess? Throwing good money after bad?? They're just adding to the mess........

    The Scoundrels of Wallstreet do a faster, better job of cleaning up messes, and at a better price for all.

    But the ultimate responsibility lies with all of us. We allowed the government to insulate us from recessions. We looked they other way, and voted for those who promised us bread and circuses. We cheered at the amazing increase in the "Value" of our houses(even though we knew that we had done nothing to earn that increase, and now the roof needs fixing too)

    Each and every crisis, we listened and allowed that disaster would result if we did not act immediately to cover our overreaches.

    Well, we are now fantastically over reached and now have to make the choice of facing the financial firing squad, or asking our "Drug" dealer Ben for an even larger shot of heroine........there are no good choices..........

  • Report this Comment On September 29, 2008, at 7:12 AM, realitycheck13 wrote:

    GREAT ARTICLE BELOW

    A Monday to Remember!

    The bailout is going to cost all of us and our children an amazing amount of money in the future. We as a country just can not afford to continue adding to a national deficit of what will be more than $11 Trillion by the end of this year.

    We fully understand the implications of no bailout. It is pretty much guaranteeing at this point that we and the rest of the world will drop into a 1930's type....

    continued at -

    www.mortgagebreakdown.com

  • Report this Comment On September 29, 2008, at 9:10 AM, kwill10 wrote:

    It's never a good idea to make financial decision based on emotion. Yet, nearly everyone commenting on this article sounds like they're in a caffeinated frenzy. I don't see this as "socialism" any more than I see social security or welfare as socialism. I don't see the current financial situation as a "depression" by any stretch; I can't predict the future, but I don't see our economy imploding. While I'm not overflowing with confidence in Washington, I do feel that our leadership is trying to create the best solution, and the fact that this plan is supported by Warren Buffet and Jack Welch means something to me. So, I am going to relax, continue to invest in the market, and see what happens next.

  • Report this Comment On September 29, 2008, at 9:18 AM, DanCorp wrote:

    With something so important, why not have the long-standing poll question changed so the Foolish vote can be clearly visible to all? ...some hesitancy perhaps?

    I say let them fail in the US ...and the UK where we've been fool enough to follow. We spent decades paying America back debt from the wars only to then mirror the lax policies of our creditors by going down the self-indulgent, litigious and accountability free route. I've lost money too, a huge chunk of my life's savings a large proportion of which was invested via the FOOL, but it was a known risk going in so no sense crying other than for my own impatience. I did let prudence waiver when I couldn't keep up with the hyper-inflation of house prices and rents here to get 'on the ladder' after years of saving and sacrifice; I took some more speculative investments and lost, will lose more, that's inevitible. Lesson learned and I still have no property.

    Some points;

    Sure, the Executives and the very government/politicians now trying to rig a bail-out need to be publicly outed, fined and imprisoned....one group scott-free so far seem to be the big accountancy groups ...in an era of lax regulation, how come these guys never were required to flag up all these irregularities and risks during their audits?

    Another,

    Between the House of Saud, China, Japan and other nations, the US has some big debts to pay-up. Rather than pro-longing the process, why not revert back to what (helped) 'made America' ...Alaska by today's standards was a steal at what, $7.2m back around 1867? Annualised growth rate of only 5% would help no end to pay off some of this debt and I'm sure both China and Russia would be interested.

    Maybe France would like to buy back some of the states sold in the Louisianna purchase of 1803? ...or Spain could buy Florida having ceded it in 1819? ...maybe reverse the Gadsden purchase for Mexico?

    Perhaps something so major is what's needed to upset the apple cart and indelibly etch the effects of greed on the national psyche (UK and US) ...what will happen though ...when the dollar devalues further into monopoly money status and the creditors come knocking ...start a war with them?

    Personally, I'd rather make a call for Buffett and Munger to help fix this crisis than anyone in power ...perhaps they can come and save Blighty too! As it stands, it seems like both nations are taking economic advise from Robert Gabriel Mugabe!

    Sadly whilst the UK was keen on Alaska at the time, and would no doubt like to have some colonies again, having followed the US into both war and socio-economic chaos, we would be ill-placed to even put in an offer for Delaware

    :(

  • Report this Comment On September 29, 2008, at 9:30 AM, scottindallas wrote:

    Your support of this bill is truly foolish--not in your ironic sense. This crisis was caused by too much cheap money. This bill is like giving a mess-load of sugar to a diabetic.

    Before this crisis the Federal Debt insured that inevitable inflation/currency devaluation is the greatest threat to this economy. Ask yourselves who will buy this debt and at what cost? The Chinese have already indicated they want nothing to do with buying into any more Dollars.

    There is no resolve to deal with our various debts, personal, municipal, statewide nor Federal. Why would anyone buy into a inevitably sinking asset as the Dollar?

    "...editor of The Concise Encyclopedia of Economics, ticks off the options: We could close the budget gap by drastically cutting spending or raising taxes. The Federal Reserve could print a lot of money, reducing the real value of the debt and making it easier to pay off. Or the government could default—in short, declare bankruptcy."

    I want to analyze this.

    Option 1: Cutting spending and raising taxes--we will likely only see taxes raised. Look at the demographics, Baby boomers are aging and old people vote. The politicians will pander to them at the expense of us younger folk. They won't cut spending but will raise payroll taxes.

    The other major Fed. expenditures are War and Debt service. These both have bigger lobbies than we young people do, so guess who'll get screwed.

    Option 2: Print money deflating the debt--this simply can't happen. When our debts are all set in T-bills or other fixed interest instruments this is indeed possible. However, our obligations are to Social Security and Medicare/Medicaid. These are pegged to inflation, so inflating the problem away is not possible. How Steve could think this applicable to our current situation is amazing.

    Option 3: Declare Bankruptcy--The financiers have a very powerful lobby. So long as money is desired and needed for re-election the financiers will be able to pay off our legislatures millions for the debt service return of Billions, ney Trillions.

    So there you have it. Look at the demographics, look at the winds of influence that blow. The powers that be will put this burden on our young shoulders for quite sometime. We don't vote, don't care and will get screwed.

  • Report this Comment On September 29, 2008, at 10:15 AM, artbros wrote:

    With a currency long unhinged from any value except the full faith and credit of the US - the faith and credit of the US is our reserve.

    Thus, what Paulson says is right. Unless the faith in our system of credit is restored, a depression is inevitable. And it will make the last one seem like child's play.

    In the past, investments denominated in dollars were the only rational choice for people in unstable economies. And that has saved us from our excesses. As bad as we may have thought it was HERE, it was still far better than it was THERE. Anyone with a half a brain (from national banks to black marketers working street corners) was happy to take dollars.

    Today that isn't true. The Euro is a viable alternative. It is poised to take the place of the dollar if faith in our credit and economy disintegrates. If that happens the 700 billion Paulson wants to spend will be dwarfed by a tidal wave of dumped dollars. The US will not be able to sell new debt (Treasuries) at any price... (just like the banks can't sell the rotten debt they hold). The mass dumping of dollars will create inflation like we’ve never seen in the United States. Think Weimar Republic Germany when they burned money to keep warm because the money burned longer than the wood or coal the money might buy. Think Argentina. When hyperinflation strikes every retiree on a fixed income will become paupers overnight – and Wal-Mart won’t be hiring.

    What seemed like a small problem between borrowers and lenders will morph into an economic flame-out of epic proportion.

    Now, I know there are those out there who believe that a forest fire is good thing. But I assure you, if you live in the forest (even if you belong to the Sierra Club), you don’t want it to go up in flames while you are in it. We are deep into the forest and the tinder dry. One spark and it goes up in flames.

    The only rational approach is to provide liquidity necessary to get through this mess. All academic arguments aside, the only fair way to do that is to get voting equity. I called my congressional delegation in support of equity tied to a bailout.

  • Report this Comment On September 29, 2008, at 10:23 AM, fooldbs wrote:

    I have read many of the responses to the bailout article but didn't see any referencing the reason for the mortgage mess I have at the top of my list, the Community Reinvestment Act of 1977, when Jimmy Carter was President. I'm not sure, but I think there was a Democratic majority in the Senate and/or House as well. This one act, while perhaps well intentioned to help people who could not afford a mortgage because of downpayment and equity requirements, laid the basis for the runaway mortgage mess we now are reaping.

    Through the years from "77 to now, politicians (mostly Democrats) have abused this open door to garner re-election votes by fooling people into believing they are for the "poor". Well, the "poor" still could not get those mortgages because of not having enough resources (jobs, etc.). Enter, Fannie Mae/Freddie Mac to buy up those mortgages from lenders and now we all have to suffer for the mess. Fannie Mae/Freddie Mac are quasi-governmental agencies subject to manipulation from politicians who obviously are more than eager to do so. Both parties are to blame, but I place most of it on the liberal Democrats who have been abusing the mantra of working for the "poor". The chickens have come home to roost and the Democratic liberals are seeking any cover they can find so that voters do not uncover the truth and turn them out of office (same goes for any Republican who went for this albatross).

    Squirm on politicians as all of you need to be voted out!!

  • Report this Comment On September 29, 2008, at 10:26 AM, dr8ke wrote:

    There are only two things the government does well - spend money, and screw things up.

    What makes you think that having the treasury step in will get our financial system back on its feet? That's a huge leap of faith.

    The situation is bad. The government already made it worse with its previous bailouts. It's going to get worse. But if the government gets involved it will turn into a travesty of mythical proportions!

  • Report this Comment On September 29, 2008, at 10:48 AM, RaulChapin wrote:

    @libertyvini: If you read Hayek and Mises you are way ahead of the crowd, if you actually understand them you are way into lonely land. (Don't you find it funny that Keynes is tought by the masses to be a capitalist or free-market thinker LMAO)

    But don't worry about being lonely, there will be plenty of real state pyramid scheme fools coming to visit you, to explain you the gosspel. To your reason they will show their huge gains... and when the smoke and mirrors are gone, they will refuse to see your truth, because fools can never be wrong. So they will say it is your damned free market that allowed the bad people to step into their great wealth creation scheme.

    Oh well, I am still putting my 100$ a month into the S&P... this great dip is letting me buy at a bargain... and 30-35 years from now when i retire i am certain this great depression looming in the background will be just another story. Remember the world was going to end in Y2K??? well the fools that predicted that are probably now helping the fear mongering of the post apocalliptic era of the no bailout scenario :-)

    (Yes 100$ a month will get me nowhere... but i will increase that as I become more financially stable, in the short term the bulk of my savings are going into a 3% a year cash account, just in case i happen to lose my job... knock on wood!!!)

    And by the way, amid this credit crissis, the bank just upped my wifes CC limit from $1K to $5K and offered me the same deal... we only use them for the monthly expenses and pay in full everytime. I guess there is still money available for the financially viable.

  • Report this Comment On September 29, 2008, at 10:58 AM, onthewind wrote:

    Putting our head in the sand is not aoption...So all we really need to do is set up one of those websites with the proceeds to help out our Wall Street friends. You know the drill, Americans are kind, caring, pick me up by the bootstrap types...And when we get to 700 billion, we can call it a day. Remember the Mantra, "Free Market, Free Market. Free Market" I'm sure all of the short Selling Hedge Fund types will take care of this in NO TIME! Maybe we should even sweeten the pot, and pledge that when we get to &00 Billion we will relax the strings on naked short selling,...In the mean time can youhelp me place an add on Craigs list for moving some Credit Default Swaps! America, isn't it a great place!

  • Report this Comment On September 29, 2008, at 12:13 PM, linesm wrote:

    Why not give the $700 billion to the small banks and credit unions that did not participate in subprime lending? If we really need a bailout then let the responsible banks deal with the bad debt. Don't give the money to irresponsible banks.

  • Report this Comment On September 29, 2008, at 12:23 PM, jerseyjames524 wrote:

    Ok I know no one reads these discussion boards but WTF has happened and who raised these scum of the earth people that put us in this. I'm sure their parents are proud of them as they are probably well off from them but I'm sure their parents were not when raising them. I wish this would of happened to them when they were raising them and they would of instilled common decency and morals to these double dealers. Thanks Wall Street for sucking us dry in the beginning, during and the end. SCUM! Oh and that goes for that retart BUSH too. Another big idiot with no common sense or decency. Maybe the WMD's are in Wall Street. We should of sent Chaney in there to take these people hunting a long time ago.

  • Report this Comment On September 29, 2008, at 1:33 PM, reidt2 wrote:

    Let's see, last year (2007) all the "financial investment" firms paid out bonuses to their employees of around $38 billion (http://www.washingtonpost.com/wp-dyn/content/article/2007/11...

    Now Lehman and Bear Stearns are gone and the others are on the ropes. So they want us to pony up $700 billion so they can keep the fun going. Hmmm, something's not right here.

  • Report this Comment On September 29, 2008, at 1:53 PM, reidt2 wrote:

    How about reducing the capital gains tax to zero for a few years and letting the investors bail out the investors? If these "assets" do exist that "we the taxpayor" would be acquiring, if the capital gains tax was eliminated for a period of time, money would flow like water and no bail out would be needed.

    I suspect these "assets" do not exist and there is a lot of paper out there that we would get nothing for. It sounds like what got us into this mess is one bank packaged "assets' into a group of assets, sold them to someone else and the last guy was left holding the bag. If I did that I would be in jail, yet these guys get big bonuses.

    I say no to Wall Street. If we end up in a depression, we know who did it and they can be put in jail.

  • Report this Comment On September 29, 2008, at 2:25 PM, reidt2 wrote:

    And where is Sarbanes / Oxley on catching this stuff. Looks like that was a bunch of crap too. Many companies jump through hoops to satisfy the audits of this and now we have even a more massive meltdown than Enron.

  • Report this Comment On September 29, 2008, at 2:39 PM, DLFTOP wrote:

    It was voted down. Thank GOD we are still the greatest democracy in the world. Now lets let Wall Street and the American business community start to solve this problem. We have some of the greatest business minds on this planet, so let's get them to work. Keep government out of the private sector and let American businesses fix the problem. There are still businessmen of honor and integrity that can fix it and will if we give them a chance.

  • Report this Comment On September 29, 2008, at 2:59 PM, blunney wrote:

    A Modest Proposal: Since our 401k's are plummeting, stocks are a lousy investment right now, and the Feds need money, how about redirecting our 401k contributions to buying Treasury bonds instead of stock? The Treasure gets the money they need (they'll get it anyway), the stock mongers get punished severely (no more free money to play with), and we the Little Guys get to invest in something safe (safer) that we have to pay back anyway. Even if we only did this for a few years, it would give Wall Street a signal that the Sheeple don't believe in them anymore. Whadda say?

  • Report this Comment On September 29, 2008, at 3:01 PM, tumachar wrote:

    A far better solution will be that govt comes opens up a new entity that refinances all homes at nominal interest rates of tresuries i.e. 4-5%.

    That way mortgage holders will be helped. Banks will no longer have bad loans on their books as people will refinance with govt.

    Any loans that cannot be refinanced should be pretty much written off, as they would have to be.

    With these conditions, the free market at least will know how to value what is left behind and move forward.

  • Report this Comment On September 29, 2008, at 3:31 PM, lluluien wrote:

    Here is the roll call vote from the House for resolution 3997 - the "Bailout". Now you can find out whether or not you need to call your Representative to tell him he's being voted out if he votes in favor of this again when it comes up for the next try. I already called Ike Skelton to tell him I'm voting for his opponent in the next election:

    http://clerk.house.gov/evs/2008/roll674.xml

  • Report this Comment On September 29, 2008, at 3:35 PM, CanadianOutsider wrote:

    "... it is critical to remember how much the credit markets mean to our way of life. Credit accounts for the overwhelming majority of the money supply in our economy."

    Isn't that the real problem then? Our way of life?

    After years of reading (mostly) good advice from the Fool on living below your means, avoiding credit, and how to deal with both good and bad markets, I'm saddened to read recent articles such as this one. It seems that when the chips are down, the Fool is just as foolish as the rest of them. :( I've read Fool books that talk about the Great Depression as having been a time when sensible, level-headed people could have (and did) make a lot of money buying devalued stocks ... now I imagine in reality they would have been jumping out of windows along with other panicking investors.

    " ... we're on the hook to clean up the mess."

    I do agree with this though. Those who live beyond their means will unfortunately suffer. But hasn't that always been the way? What made us think we somehow outgrew the need for real money?

    The problem isn't that the economy is falling. The problem is that it was ever allowed to rise so high and so fast (mostly artificially) to begin with. Unmaintainable growth is no solution. If this "bailout" happens, won't it just delay the fall (if it helps at all)?

  • Report this Comment On September 29, 2008, at 3:36 PM, vest0r2 wrote:

    Nothing doing. You want to FIX the problem and I'm on board. You want to slap a $700 billion (FIRST INSTALLMENT) band-aid on it and I'm out of here.

    GET RID OF THE FEDERAL RESERVE BANK AND ITS WORTHLESS FIAT CURRENCY. A central bank is NEVER a good idea. It's an anchor around our necks and it has got to go -- Federal Reserve notes worthless? Then let the Federal Reserve, A PRIVATE BANK, take their lumps.

    Bring back GOLD-BACKED DOLLARS and I'll gladly sign on to a recovery package. If you're talking about an obscene wealth transfer to the uber-wealthy ($20 million "golden parachute"???) COUNT ME OUT!

  • Report this Comment On September 29, 2008, at 4:36 PM, Slappster wrote:

    Gold-backed dollars? There's not enough gold in the world to back $15 trillion in currency.

  • Report this Comment On September 29, 2008, at 4:37 PM, Slappster wrote:

    What needs to be done is to raise deposit insurance to $5 million. The $100k is an antiquated limit that is not a large figure today. This would prevent runs on the banks while not immediately costing taxpayers anything.

  • Report this Comment On September 29, 2008, at 5:21 PM, ttropics wrote:

    HAH! I took my CD's out of the bank and put them into a well-respected index fund-I knew it was risky but I figured for a few years until interest rates come back. Well, they will come back, but not by the mechanism I thought at the time. Besides that I had a 'play money' portfolio of 5 digits. Know what? My life savings have decreased by 35% now. My bad. Didn't do my homework to see the impending doom coming. I became a good fool. BUT I DO NOT AND NEVER WILL OWE MONEY THAT I CANNOT BORROW! So, you know what? Bring it on. Give these rich jerks their due and make them pay for what they've done. Here's our resolution:

    1. Hunt down and levy huge fines on all the mortgage brokers and lenders that wrote bad loans and sold them to FNM, FMC. Then pull their licenses. Hunt down not just CEOs but all board people that also allowed this to happen and treat them similarly. Maybe some foreign investors want to have a word with them after we're done so ship them off. Good riddance to bad rubbish.

    2. Let people who signed loans they knew they couldn't pay crash and burn. Yeah, let's buy those houses from the banks for a song, and resell them.

    3. Ride out this depression (because folks it ain't just a recession anymore) and do what we know we can do...let prices drop, let businesses (including banks) fail, and pick up the pieces and start over. I'm not afraid. I have worked all my life, saved to buy what I wanted, and I own my home outright. That's why I had money to lose in this mess created by greed and idiots. Three more suggestions but these have to be undertaken by the people of this great country - (IMO the only great thing left in this country):

    - Vote out the greedy bozos who allowed this mess

    - Indict Cheney on treason charges, for killing thousands of Americans for his personal gain and take 7/8 of his income for the last 10 years (along with another select few), put that together with fines collected from the lenders and brokers (see above) and use THAT to help things in capital markets.

    - Outlaw any association of any business with any lobby. Real simple. So there it is, from an INVESTOR's viewpoint.

  • Report this Comment On September 29, 2008, at 6:41 PM, abliviax wrote:

    NO BAILOUT. For years, I've wondered how people can afford their lifestyle, maybe people will get realistic now.

    WE CAN'T AFFORD TO INCREASE THE DEFICIT!!!! -- Let's pay it down.

  • Report this Comment On September 29, 2008, at 9:11 PM, foolrancher wrote:

    I am a fiscal conservative. So where we are right now disgusts me. But when you get past that, you still have to address the problem or the consequences of not addressing it. I agree Wall St. has a lot of the blame, but they are not alone. Those mortgage loans that were written weren't for homes in downtown NYC. They were for homes in Peoria and Tulsa and Spokane and everywhere but NYC. A lot of the local outfits writing those mortgages are already out of business. The Wall St. firms that dealt in the subprime paper are either out of business, no longer independent, and at the very least have been severely punished financially. I am a rancher. I run a small business. I borrow operating money. So problems in the credit industry affect me directly. But the real impact will come from the severe recession/depression we will go through as the credit markets dry up. Cattle prices (down 20% in the last two weeks) will drop precipitously. My ability to borrow operating money will drop accordingly, forcing me to sell off productive assets (my cowherd) at depressed prices. My ability to make my ranch payments will be similarly impacted. I know there are some that will think that the fact we borrow money puts all the onus on us. And, ultimately it will. The point is, if we're so bent on punishing the fat cats on Wall St. we're also going to destroy much of Main St. We started with nothing. We inherited nothing; had no family ranch operation to step into. We've worked hard, been frugal, saved our money, paid our taxes, and taken what we thought were prudent risks, to build a modest sized ranching operation. The bottom line is, If we don't pass this workout, Wall St. and the big banks may suffer, but an awful lot of us on Main St. will lose our life's work.

  • Report this Comment On September 29, 2008, at 9:37 PM, JPMillerHOU wrote:

    To answer Scott Schedler’s three principles:

    1. “That letting massive portions of our financial sector fail would have enormous negative effects across our economy.”

    Failing massively is where we are now caused in large part by government intervention. More intervention by the incompetents in government with their political rather than economic agenda will only make things worse. It is precisely in dire emergencies when it is most imperative to flee from government to the free market.

    2. “That although we'd prefer a free-market solution, the U.S. government is the only entity with resources sufficient to make a significant impact.”

    The government does not have and never had and never will have resources of its own. All resources come from and can only come from private production. Any resources our government disposes were taken by force from producers.

    3. “That government intervention must protect the interests of the American taxpayer.”

    Legitimate government intervention must protect everyone. This is the province of the courts to protect the contracts freely entered into by individuals and businesses and to enforce the provisions for remediation built into those contracts. This mechanism is what is being trampled on by intervention. If fraud has been perpetrated, prosecute it. Justice is what is needed not bailouts for cronies, scoundrels and misfits whether bankers, borrowers, congressmen or bureaucrats. Congress set up these institutions and then politicized them to the point of the feeding frenzy that ensued. Congress should step aside and let the courts and private individuals like Warren Buffett solve this mess.

    Indeed Warren Buffett cut a deal with Goldman Sachs and my conviction is that he will manage those new assets wisely. I'm not selling my BRK stock. But I have no conviction whatsoever that a bunch of Treasury bureaucrats will manage their newly acquired assets with anywhere near the acumen that Warren Buffett displays. In fact they will have all kinds of political pressure to handle them in any way but to maximize profit for their new owners (the taxpayers). Government agents never act like businessmen. They cannot. They are instruments of force, not trade.

    The correct principles that we should be following in this crisis are the principles of capitalism espoused in Objectivism the philosophy of Ayn Rand.

  • Report this Comment On September 29, 2008, at 9:59 PM, fredaa wrote:

    I have difficulty trusting our government officials' judgment to get us out of this financial mess. I also do not trust their motives. The pundits on the news have varying opinions, which they vehemently defend, on what to do to help the economy. All this tells me is that no one really knows what to do. So, should we taxpayers invest $7 billion and hope it's the right decision or should we let the free markets prevail. Obviously I don't know the answer but I do believe in capitalism, less government intervention and the free market system.

  • Report this Comment On September 29, 2008, at 10:39 PM, bigepatient wrote:

    I was young and got caught in Black Tuesday. Paid for it a number of years.

    Result; NEVER USED CREDIT AGAIN AND NEVER WILL.

    Fast Forward year 2000; Cancer; radiation, House burned down, marriage broken, lost job, Parkinson's like illness, more health problems, crashed motorcycle (multiple broken bones), lost best friend to cancer (dog) and more. A bad year.

    Wondered Why? Searched for answers. Awoke from what I call the "Corporate Coma". Feel Free and Superiorally intelligent to most all I have ever met and probably will meet. Now no longer what I call a "Dumbed Ass American Sheeple".

    Fast forward Nov 2007; saw this coming and began to liquidate (I only go long). Few positions early 2008. 100% percent cash early summer. Made 50% first six months (yes, a slow year).

    Built beautiful home off the grid (neighbors are amazed). Produce own power, heat, edibles, all that is needed.

    Good Health now back.

    Learn from my path.

    Fool; Your Wrong. Let those who are going to fail, fail. There is no other way for them to learn.

  • Report this Comment On September 29, 2008, at 11:17 PM, sb101cu wrote:

    See the movie http://www.iousathemovie.com, where the bi-partisan law makers and bankers have given the prognosis if not the diagnosis of things to come. Wait till 2040, when the social security and medicare goes bust. The financial crisis of today,in USA,is just the TIP of the iceberg. It is an irony, that the family unit (in USA) over the last three decade has gone SMALLER and the houses have gone BIGGER. Something to think about...

    The world is getting "flatter", and USA is losing is technological edge in the information age. The number of PHD'S of native citizens in computer science is is getting smaller, and those foreigners who do earn their PHD'S here are going back home or to Europe. The " BRAIN DRAIN" is more important than the "FINANCIAL DRAIN" in the longer term perspective, as Adam Smith said in "The wealth of the Nations", it is the people, the quality of human capital that is COMPARATIVELY more important.

    I would love to hear the comments of others. Thanks

  • Report this Comment On September 29, 2008, at 11:21 PM, sb101cu wrote:

    See the movie http://www.iousathemovie.com, where the bi-partisan law makers and bankers have given the prognosis if not the diagnosis of things to come. Wait till 2040, when the social security and medicare goes bust. The financial crisis of today,in USA,is just the TIP of the iceberg. It is an irony, that the family unit (in USA) over the last three decade has gone SMALLER and the houses have gone BIGGER. Something to think about...

    The world is getting "flatter", and USA is losing is technological edge in the information age. The number of PHD'S of native citizens in computer science is is getting smaller, and those foreigners who do earn their PHD'S here are going back home or to Europe. The " BRAIN DRAIN" is more important than the "FINANCIAL DRAIN" in the longer term perspective, as Adam Smith said in "The wealth of the Nations", it is the people, the quality of human capital that is COMPARATIVELY more important.

    I would love to hear the comments of others. Thanks

  • Report this Comment On September 30, 2008, at 2:31 AM, patdon wrote:

    The flaw here is the statement that "only the Treasury has the financial resources to do something." Wrong. The Treasury is the taxpayers, who overwhelmingly oppose this. Are we a democracy or not? I continue to believe that the Fool's pushing of this bail out smacks of self-interest and nothing else. Shame on you.

  • Report this Comment On September 30, 2008, at 7:14 AM, rider00 wrote:

    Here's why this bailout is a grossly unfair:

    I've been loudly calling a housing bubble since 2003 (I was a little early). I've saved up a nice nest egg of about $250,000 by WORKING MY ASS OFF and LIVING FRUGALLY. Now, the bubble bursting that I've been waiting for has happened, the credit markets are supposed to dry up, housing prices are supposed to crash (at least down to levels that correlate to rents or trend lines) and I'm supposed to be able to pay cash for the beautiful home that I've been waiting my whole life to buy. That's how markets are suppossed to work!! I'm supposed to be one the one who made the RIGHT decisions in all this. Now, congress will take actions to raise my tax burden and articifially prop up home prices so that I can't buy at a fair market price? That makes me the chump -- talk about moral hazard for institutions, how about moral hazard for individuals.

  • Report this Comment On September 30, 2008, at 8:17 AM, cams0ft wrote:

    I think everyone needs to watch the video MONEY AS DEBT.

    $700BN will create more debt and more money in the money supply, hence more inflation. Taxes will rise in order to pay the interest on this addtional national debt.

    The FED will then raise their interest rate to gain even more profit. So what we will have is simply more TAX!!!

    LET THE CROOKED SYSTEM BREAK.

  • Report this Comment On September 30, 2008, at 8:19 AM, cams0ft wrote:

    WE NEED MONETARY REFORM!

  • Report this Comment On September 30, 2008, at 8:29 AM, mkyfred wrote:

    Reading the comments here is interesting. It sounds like the banks here are lending the money to some alien living on another planet.

    Those banks lend money to those who cannot afford the loan in the first place but still decided to get a mortgage.

    It is ok if you are going to blame the banks... but who forced those people to get the mortgage in the first place?

    The problem created by the american public need to be fixed by the american people.

  • Report this Comment On September 30, 2008, at 8:47 AM, cams0ft wrote:

    mkyfred:

    If there were no mortgages. then houses wouldn't be so expensive in the first place.

    There was a time when you could own a home without having to slave for 25 years!!!!

  • Report this Comment On September 30, 2008, at 9:36 AM, EBounding wrote:

    It's hard not to believe that there's a conflict of interest here. I can't imagine it being good business for the Fool's "Stock Advisor" ticker to read out a nice red "Outperform by -20%!" if the bailout doesn't go through.

  • Report this Comment On September 30, 2008, at 12:30 PM, CherControl wrote:

    Some of you are not convinced that this is a crisis for all of us. Here is what will happen: Foreclosures will happen in all neighborhoods. That will decrease the value of all our homes. Our infrastructure relies on taxes on the property values. Reduced garbage collection, police, EMT's or any public service. Credit will be hard to get, which will impact farmers that rely on bank loans for operating throughout the year who then pay it off after harvest. People growing our food will go out of business. There are far more consequences than this, but this is enough for me.

  • Report this Comment On September 30, 2008, at 2:52 PM, socialdis wrote:

    I have to laugh at the anger of so many people and the lack of intelligence of people, even people who post here.

    In the first place $700,000,000,000.00 divided by 301,000,000 IS NOT $2.3 Million per person, as someone stated in a previous post. It is only $2325.58. Apparently people who believe this are using Democratic Math.

    I do agree to a point that we should just let institutions fail. We will never know how bad it will get until people actually feel it first hand.

    If only people would get as upset over $6 Billion in earmarks or giveaways of taxpayer money to the lower class people who are so lazy they don't want to get 2 jobs. I do have a lot of respect for those who man up and get 2 jobs to keep afloat and to make their house payments and other expenses.

    I know of someone who got foreclosed on and she blames Bush and yet she ALWAYS has money for booze.

    Too many people believe they are entitled to only work one job of 8 hours per day. If you aren't making enough, then get a second job.

    I am against this bill but still believe the rescue plan should be passed.

    I find it amusing how some people like to lay all the blame on the Republicans when clearly it was a bipartisan creation.

    Democrats who have always been big supporters of Fannie Mae/Freddie Mac. Republicans have wanted more oversight and it is beyond me why when they controlled Congress, they did nothing.

    The simple fact is Fannie & Freddie should never have been allowed to have some impact on 50% of all mortgages. If it were a completely private company, Democrats would be screaming that it is a monopoly or in some way should not be allowed to be that big.

    You also have community groups, Democrats and even Pres Bush who encourages the ability of lower income people to get mortgages and who want people to be able to get into homes with little to no down payment.

    Why does nobody blame the ratings agencies who rated this stuff.

    It's not like the rescue plan will completely solve everything. What will cause banks to continue to lend money? No matter what happens, lending will be restricted to those with lessor credit scores, which would be a great thing.

    Are we really going to trust the vocal minority over those with knowledge of finance and economics? Are we going to believe the average joe six pack who doesn't know how many branches of government their are and who is more concerned about who Paris Hilton is dating over what is going on in Washington?

    Sometimes politicians have to make unpopular decisions that go against what the constituents in their districts want.

    Most of the general public wants what feels good (more unemployment benefits, more Social Security, Free Health Care) but they also want lower taxes.

    If people were smart, they would realize that government programs cost money and the simple fact is there are not enough "rich" people in this country to pay for all the government programs that the public claims they support.

  • Report this Comment On September 30, 2008, at 3:59 PM, Passarino wrote:

    Plan 9 from Outer Space was a better plan than this.

  • Report this Comment On September 30, 2008, at 5:35 PM, PerrleT wrote:

    I am impressed by the number of comments that say they have their home and car paid for. Was this with cash from the getgo? I think they mostly used credit to begin with. Now they wish to cut off credit to your children!

    Responsible borrowing is an important part of capitalism.

  • Report this Comment On October 01, 2008, at 6:14 AM, phillyd100 wrote:

    U, and others, need to change your language set. There is no such thing as a Government bailout or that the Government has the resources, etc etc. The Government is US. Start changing your writing to say that WE need to bailout the banks and that WE need to chip in to help the financial markets and WE are the only group of people large enough to accomplish this.

    I'm not for the bailout because I don't think that it will do anything for us a month out.

    If banks get their bad debts taken away by US then how will that free up credit for US? We have a greatly reduced earnings base (the good jobs are leaving) and we are WAY OVEREXTENDED currently in our use of debt. In other words there's still a greatly reduced Borrower Base so are we then going to entice already strapped people with cheap and easy to access money? Then when they can't pay it back we'll call the bankers greedy and you can copy & paste this article again in 5 years for another trillion or so?

    No thanks .... there is no way out of this without pain. If I go through the pain now my children and grandchildren will have a better chance and hopefully they won't allow the country to repeat our mistakes. We have ruined this once great nation.

  • Report this Comment On October 01, 2008, at 5:43 PM, BBHeavyDuty wrote:

    Does anybody here remember the RTC (Resolution Trust Company)?

    It was a temporary federal agency that socialized bad debt related to home loans (ring a bell), and basically put the Savings and Loan Industry out of it's misery; at an expense of nearly $500 billion, borne by the taxpayer.

    The RTC was required not to investigate suspicion of illegal activity, nor was it to turn said evidence over to an investigative agency of any kind.

    So, here we are again!

    No bail out.

    Allow access to bankruptcy courts, again, that have the authority to restructure loans secured by home or property.

    If you lost money from stupid investments in "mortgage backed" paper, suck it up (like everybody else who has ever lost money investing) and get back to work; unless you're the subject of an investigation.

  • Report this Comment On October 01, 2008, at 7:56 PM, tpol1 wrote:

    Of the people,By the people, and For the people, the government was created by US the people,

    Only when it comes to making decisions

    we the people have no say so in the matter

    Well I think its time we showed them

    that we are not going to take the lying

    anymore,

    When Clinton left office he left a surplus

    of money this money was tax payer money

    not stock money there's a difference tax payer money is money collected by the I.R.S. not by wall street stocks is money that comes from the rich and small

    investors , we know what happened to the

    stocks, but what happened to the tax money ?, just like Alaska we have the Brits sucking are oil out of Alaska

    and selling it back to us for a hire price

    why doesn't gov Palin do something about it

    come on America wake up,

    We the people must come together

    united we stand divided we fall !!! ?.

  • Report this Comment On October 01, 2008, at 8:08 PM, tpol1 wrote:

    Of the people,By the people, and For the people, the government was created by US the people,

    Only when it comes to making decisions

    we the people have no say so in the matter

    Well I think its time we showed them

    that we are not going to take the lying

    anymore,

    When Clinton left office he left a surplus

    of money this money was tax payer money

    not stock money there's a difference tax payer money is money collected by the I.R.S. not by wall street stocks is money that comes from the rich and small

    investors , we know what happened to the

    stocks, but what happened to the tax money ?, just like Alaska we have the Brits sucking are oil out of Alaska

    and selling it back to us for a hire price

    why doesn't gov Palin do something about it

    come on America wake up,

    We the people must come together

    united we stand divided we fall !!! ?,if stocks come out of our taxes then we the people have stocks I want the stocks Bush,and Chaney have there money in, but were not stupid we know the defferance between taxes, and stocks, and the price of oil went down to $97 dallors a barrle now why hasnt the price of gas, why cause no one asks why thw goverment dont care ethier dose the F.B.I. ? there not intouchables anymore ?.

  • Report this Comment On October 01, 2008, at 8:10 PM, tpol1 wrote:

    Of the people,By the people, and For the people, the government was created by US the people,

    Only when it comes to making decisions

    we the people have no say so in the matter

    Well I think its time we showed them

    that we are not going to take the lying

    anymore,

    When Clinton left office he left a surplus

    of money this money was tax payer money

    not stock money there's a difference tax payer money is money collected by the I.R.S. not by wall street stocks is money that comes from the rich and small

    investors , we know what happened to the

    stocks, but what happened to the tax money ?, just like Alaska we have the Brits sucking are oil out of Alaska

    and selling it back to us for a hire price

    why doesn't gov Palin do something about it

    come on America wake up,

    We the people must come together

    united we stand divided we fall !!! ?,if stocks come out of our taxes then we the people have stocks I want the stocks Bush,and Chaney have there money in, but were not stupid we know the difference between taxes, and stocks, and the price of oil went down to $97 dollars a barrel now why hasn't the price of gas, why cause no one asks why the government don't care either does the F.B.I. ? there not untouchables anymore ?.

  • Report this Comment On October 02, 2008, at 12:11 PM, Kidz4Him wrote:

    This is not a situation created only by Wall Street. A large part of the problem is homeowners buying into the belief that they can buy a much more expensive house than they really could afford by getting into an interest only mortgage with low rates (or similar risky mortgage). Just like the tech stocks, the bubble HAD to come to an end but nobody wanted to believe it. Now with home prices going down, interest rates going up and no equity in their homes (maybe no job anymore), foreclosures are happening at an alarming rate.

    True, lenders were guilty of selling the lie and investors bought it quite heavily too, but the general population is guilty as well for trying to live outside their means.

    It may not be you who over-extended yourself, but it's not just Wall Street either. The government allowed such risky practices and many, many Americans are at fault along with the rest.

    I hear lots of opinions about whether the bailout is warranted or not and a very curious side of me wants to see what happens if we do nothing. But I want to make sure the blame gets spread around to all who are guilty.

  • Report this Comment On October 02, 2008, at 1:48 PM, larn919 wrote:

    For someone who's suppose to be market savvy, you're either clueless or patronizing all the idiots in this country who want to blame someone else for a tragedy they not only encouraged, but insisted on - I suspect some of both. Bin Laden may have kicked the ball, but 85% of the "patriotic and courageous" citizens who pushed it into a $10 trillion hole. Now they're whining because they're having to pull it back out.

    I'm personally part of the 15% who never want any of this from the beginning. My mistake was optimistically hoping Americans would wake up any moment.

    Reading most of the comments on the internet - and now, your ridiculous comment, I am beginning to realize how foolish I've been. My only salvation has been my holdings in HAL and COP over most of the war. I've recently gone from investing to trading, shorting every bump in the market.

    The bears are in the camp, and we're eating everything that moves.

  • Report this Comment On October 03, 2008, at 3:48 AM, NoMoeMoney wrote:

    Sorry but if this country falls in to the abbis, it deserves to. Too many people living too long, fat, dumb and happy on CREDIT they could not pay back. Now everyone is running around like chicken little saying the sky is falling, let it fall ! This country full of spoiled rich mommas boys needs it own dose of reality. Life is hard and is going to get a lot harder, deal with it.

  • Report this Comment On October 03, 2008, at 12:21 PM, JimNKate wrote:

    OK, I get it. We're mad as h*** and we're not going to take it anymore. Except we can only blame ourselves. (Collectively, of course... I, like most of you, have only made good decisions! ;-} )

    Want to blame the administration because they failed to regulate? We voted to put them there, and left them to do their perfidy with only the merest whimper of resistance. Beyond that, it's not just the nasty Bush Rupublicans; the underlying legal problem at least includes the Clinton-era WTO and repeal of Glass-Steagall that are coming back to bite us. Laws too weak? We've had Congresses led by both parties, mostly made up of the same people re-elected term after term. We get the govenment we desrve and insist on.

    Much as I hate to say it, I think I have to hope the plan passes. Then I hope for the unthinkable: responsible citizens voting out the incumbents to start with, then holding our new "representatives" accountable to take basic steps like regulating margin requirements, banning hedge funds and mortgage bundling, and similar steps to protect the economic system of which we the people are the owners.

    Step three takes place in the private realm of personal commerce: don't buy it. What ever it is, only buy it if you need it and have the money. If a Ford gets you where you need to go, don't buy a Lexus-- at least unless you can pay cash for it. Live modestly within your means and save for a future home, then buy one only when the market makes sense-- there is no basic house in the world worth the insane amounts the idiots on the coasts and in Florida were paying. If there were price resistance, if only the buyers were responsible, the thieves on Wall Street would never have been able to cause the problem.

    Sounds simple, but we've raised a couple of generations that never balance their checkbooks and rely on car sales people and realtors to tell them what they can afford. This must stop. We can only hope the Congress can provide a little financial confidence and cash flow so we can set about the bigger and more painful part of recovering our sanity.

    Twelve Step programs start with the acknowledgement of the spiritual and emotional sickness at the heart of whichever addiction. An addict must first confess his/her powerlessness over the addictive behavior. It's time our country began a national twelve step program for addiction to the credit/consumption cycle. Those who make it to recovery almost always speak of the happiness and freedom they experience when they live in sobriety or abstinence. Debt cycles, like other addictions are a sort of captivity or slavery. I'd like America to once again be the land of the (debt) free.

  • Report this Comment On October 03, 2008, at 1:55 PM, notfooled12345 wrote:

    Congratulations to the house on finally deciding to throw a trillion dollar spit ball, at a thirty trillion dollar charging elephant.

    A little like spitting on a three alarm, but at least you can say you tried.

    Good luck and judgement to all,

    Notfooled12345.

  • Report this Comment On October 03, 2008, at 3:18 PM, Blindnomore wrote:

    Reading alot of these comments tells me one thing. Or several actually, but the prevalent ones are that first, We the people are not being represented at all. Watching the passage of this bill only solidifies number two, We the people have to get to the polling place and cast our votes to oust every single one of these supposed public servants. They only serve the dollars they get from whoever gives them the most. Here is a very good broadcast about the true causes of this poop hill were sinking in and the thing that could have fixed it without this bailout and putting all tax paying citizens in the foreclosure column. http://www.solutionsday2008.com/blog/2008/10/sd2008-economy-...

    It is so simple it will have you so angry that hopefully you will now call your representatives offices in DC and in their local district to express your anger in a manner that suggests their seat is not going to have them in it if they don't recind this ridiculous bail out that is totally a scam to ruin the middle class and most of the upper class. The ultra wealthy will be the ones who benefit. Not you or I, we don't have enough at stake to warrant the attention of our Representatives. Unless we actually pick up the phone and dial their number, nothing will ever change to benefit the classes from lower through the upper middle. You have to call them and tell them they shall not be a representative with your vote or approval no more.

    Paulson, Bernanke, Frank, Bush are all products of the S and L scandal from the eighties. The bailouts then are nothing to what they have orchestrated this go around. NO one buys the crap their selling from what I read other than the media brown nosers who never dissent anything where gov't. spends more than it has.

  • Report this Comment On October 03, 2008, at 3:46 PM, yattaboy wrote:

    Folks, imagine if the US Treasury took all money out of circulation. And then banks shut down their credit and debit card systems. Those who still use checks would be told, sorry, no checks as too many bad ones are being passed. You'd say, how do I pay for meals, rent, clothes? They would all answer "I don't know". This is exactly what has happened, at a high level in our economic system, where money starts its long downstream flow to all of us in the form of salaries and benefits, at the bank lending and investment level. And many of your are outraged that the government and treasury are trying to do something about it?? Do you want to see what happens next if money doesn't start flowing again???

  • Report this Comment On October 03, 2008, at 7:07 PM, lugnutzmike wrote:

    As a "New Fool" I have read many of my educated and esteemed Fellow Fools comments and agreed or could see many of the arguements presented. HOWEVER, I listened to the congressional talking heads on the financial news networks patting themselves on the back for this cow-pie with whipped cream they have foisted on the American taxpayer. I forget the name of the congressional empty head who frankly admitted that now they had to go back and produce a bill that had regulations in it. Shouldn't RE-regulation, reform, and accountability been first and formost? I doubt that there will be any serious attempt to "go back" now and regulate anything. Congress had business/banking by the short hairs and let them go, setting the economy up for this same kind of financial crisis 20-30 years down the road. To the Fool who made the comment that we had more to gain from passage of the bill that financial meltdown I say "We Fool's should be ready to make money from either scenario." After all, we make our own luck, and "Luck is the intersection of opportunity and awareness." Good Luck Fools.

  • Report this Comment On October 10, 2008, at 4:13 PM, notfooled12345 wrote:

    How can an administration that is ten Trillion dollars in debt , vouch for so much as a car loan?

    Every american house-hold already owes 80k or so to more prudent people.

    It is like asking my unemployed, bankrupt uncle to co-sign my mortgage.

    It is nonsensical.

    Credibility/creditability is earned.The benefit of doubt has a shelf life...

    The great USA has past its best before date...

    Now we all smell.

    notfooled12345

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 738613, ~/Articles/ArticleHandler.aspx, 10/25/2014 11:05:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement