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Finance and Ecomomy

Bailout: Yes or No?

Economic Tsar?

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We heard today on the show that regular people are really angry at the idea of bailing out Wall Street to the tune of $700 billion. They think Wall Street should pay, not taxpayers.

Many are wondering about this provision in the bailout language:

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

Andrew Ross Sorkin at the New York Times calls it the "mother of all power grabs."

Senator Christopher Dodd (D), chairman of the Senate Banking Committee, says the plan is "unacceptable." His Republican colleague on the committee agrees. Senator Richard Shelby said today, " We have got to look at some alternatives."

What do you think?



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Unfortunately, Gov't regs require Banks to keep a certain debt/asset ratio and if they must carry this bad paper, most future lending will stop, and the economy will fail. Better a gov't "company" a la Resolution Trust, buys up these debts so we can move forward. But there must be regs to stop corp greed, and golden parachutes, and some firings, otherwise the greed continues.

Sent by Joseph De Marie | 3:04 PM | 9-23-2008

We need to move to a handicap accessible home because of a family illness but we can't because the value of our home has declined due to neighboring foreclosures. We were going to borrow from my husband's employee stock based retirement plan for the down payment but that's not possible now because its value has declined also. We are hard-working American citizens, we pay are bills in full and on time. Now we must pay the piper even though we didn't dance with the devil. When are the Republican ideologues going to realize that human greed in inherent in a capitalistic economy and will run wild unless there are appropriate regulations? It seems to me those executives responsible for this mess need to take a reduction in their exorbitant compensation. The buck has to stop somewhere and it shouldn't be with the average American taxpayer.

I am very angry about this economic mess and I won't even pretend to understand it. As a taxpayer I was looking forward to having my tax dollars pay for universal healthcare and education improvements in the next administration. Now those hopes are likely dashed and I'm mad as hec! I accept absolutely no personal responsibility in this mess. My family believes strongly in social justice and therefore tries to live simply so others may simply live. Now our taxes will bailout Wall Street instead of being used toward social justice issues. Even after the bailout the wealthy Wall Street moguls will continue to live comfortably in their million dollar mansions while those who can't afford healthcare stand in lines as foodbanks and stay in shelters being served by the very same community organizers and liberals that the Republicans disdain.

How can Republicans claim they are the "fiscally conservative" and "family values" party when their policies lead to this immoral disaster? They have not only ruined the lives of millions with their illicit war and unfair economic policies they have also sabotaged the next administration by leaving them with an almost insurmountable mess to clean up. Anyone willing to vote Republican again needs to search their heart and soul before filling in those bubbles in the voting booth. As for me I will not be duped by their phony claims about moral superiority. This is why single-issue voters are so detrimental to this country; the Republican Party uses the pro-life agenda to mask their underlying policies that support greed and social injustice. The single-issue religious voter is in effect supporting a Party whose economic policies systemically destroys the lives of the poor, the sick and the weak among us--is that really pro-lfe? We are living with the disastrous consequences of their hypocrisy and any truly religious person would be able to see this clearly.

Sent by Ali Harrod | 3:23 PM | 9-23-2008

Any bail out of Wall Street should be done within the current power structure, and no additional powers should be granted.

Any devolution of power to the administrative or executive branches eliminates another check & balance within the system, and will make the system weaker.

PS - the wall street execs should be dropped without "golden parachutes".

Sent by Gil Payson | 6:40 PM | 9-23-2008

What we have here is another example of blank check administartion, 'This is what we propose and there-for there is no other option'. Analyze it inside out...bottom line, we swallow this one, we deserve to be called fools.

Where are the adults when you need them?

Sent by george gekas | 8:48 PM | 9-23-2008

I am a liberal Democrat and never thought I would completely agree with Newt Gringrich on any issue, but last night, on NPR, as he was stating his opposition to the 700 billion dollar Wall Street Bailout, I agreed with every word he said!

Sent by Jill Mount | 9:20 PM | 9-23-2008

What everyone is missing is the complicity of Fanny Mae and Freddy Mac to this mess. These illigitimate children of our government were mismanaged and these entities put pressure on lenders to make shakey loans. It's greed all right, but it's main address is on a prominant street located in Washington DC, not Wall Street.

Sent by Michael Robinson | 11:09 PM | 9-23-2008

It is unthinkable that taxpayers would shoulder the burden of bailing out Wall St. corporations and executives. The idea that our politicians would reimburse the wealthy individuals who gambled the earnings of everyday Americans through fraud, predatory lending, unjustified fees and interest, and faulty risk assessment models, is an insult and complete disregard for the American people. I have heard members of the media state that the subsidization and taxpayer repayment of Wall St.'s mistakes and losses could easily serve as a reason for a revolution in this country. A bail out on this scale, in my opinion, equates to the complete abandonment of our politician's responsibility for the welfare of the American population. This surely seems as much a justification as any for a revolution of our leadership and regulatory system in this country. Hopefully the FBI's investigation of 26 firms and a slew of politicians will clean up this problem before it gets too far out of hand...

Sent by John | 11:55 PM | 9-23-2008

NO BAILOUT! QUESTION: what happens, when investors aren't willing to purchase these "toxic papers", why should investors take a possible long term risk. These may be illiquid assets. With unemployment rising, how long would an investor expect to wait for return, and how will the Feds replenish the debt we are at. If anything take $700 billion and put half into researching for potential assets, and leave them with the bad ones. Give the other half to US citizens to pay their bills e.g. property tax, homeowners insurance, and avoid more possible foreclosures after tax season. Provide to large companies that can provide jobs larger deductions for 5 years and start working on replenishing the deficit. This $700 billion dollars should go towards a coming up with a growing chain effect. The can't just buy these assets, because the feds may extending their debt for over 5 years. We can't afford another bailout, We can't solve the problem of inflation with inflation, If they they continue in there current direction regarding this bailout it could collapse the US economy completely.

Sent by Jude Fort Lauderdale, Fl | 11:54 AM | 9-24-2008

If we are willing to spend this much money - let's spend it on ourselves - have the Federal government pay off everyone's mortgage. Then - with the money we aren't spending on that - we'll spend it buying consumer goods - that would stimulate the economy.

Sent by Jerrold Gustafson | 12:17 PM | 9-24-2008

I say give the money to the people of the U.S.A. in a check, you know, the tax payers, they pay their house off with a low interest loan from the Country (the Country makes a profit on interest), killing all the future interest to the Bank but covering the principle in full, the people keep their house, money goes into the bank, bank covers the loan and continue to rebuild themselves just like any other company in trouble, the people have their house as an asset and they don't live on the street, issue is resolved, Wow, help the people and let business be business, thrive or sell...what a thought.
And do it fast -- just like the Bailouts.
There will have to be repercussions to the people that do not pay off their house, or a way to make sure that the money goes to the house, and not to new cars or Big screen TV's, that will not help the issue, Big Brother will have to watch to make sure this is done right, you can't just hand people or companies money and expect them to do the right thing....

Sent by Andy Mellentine | 1:17 PM | 9-24-2008

Two points regarding the proposed taxpayer bailout:

1) The current fiscal crises was NO ACCIDENT--it was both PREDICTABLE and PREDICTED. STOP kicking-the-can down the road and let the chips fall! This PONZI SCHEME must come to an end, NOW!

2) In the upcoming elections, I will be voting AGAINST anyone who supports using ONE-DIME of taxpayer money to bail out the financial markets. Period. NO EXCEPTIONS.

Sent by Mark | 1:18 PM | 9-24-2008

absolutely not - no bailout! why should we shoulder this bill when Bush has continuously denied help to homeowners facing foreclosure due to this mess.

Sent by mbv | 1:20 PM | 9-24-2008

Joining what seems to be a very, very large number of fellow citizens, I am appalled by the scope and speed of the bailout. I think we all feel very powerless.

Sent by Nancy Lardner | 1:24 PM | 9-24-2008

In brief: hell no and the 'urgent matter' needing our 'upmost attention' is that we need new people in regulations. That anyone in power could not see this coming is absurd and that they can now stand in front of the american people claiming that they NOW KNOW how to fix the mess that they were/are paid to prevent is unbelievable. Try that at your job and see how fast the door hits you. Funny that the very party that totes out how we need to 'take responsibilty' and 'pull ourselves up by our boot straps' are completely willing to hand out a blank check with little to no hesitation. are these the 'values' we should be teaching our children?

Sent by LKS | 1:37 PM | 9-24-2008

The bailout that has been proposed is completely unnecessary. The fear that the economy will fail if the US banks are not bailed out is a myth, pure and simple. There is still plenty of cash laying around in hedge funds, foreign banks, and Berkshire Hathaway to purchase the illiquid securities and companies at their fair value. The banking system won't freeze. There would still be loans available. People would still be able to get cash. Yes, loans would come with a higher interest rate. Yes, banks would have to pay higher interest to attract deposits. Yes, governments, companies, and individuals will have to cut back and live on current cash flow. But the world won't end and, after a short correction in asset prices, the US and its citizenry will be better off. Paulson and Congress need to stop fear mongering and let the market do what it does best: separate the wheat from the chaff.

Sent by Ryan | 1:53 PM | 9-24-2008

I think our economical problem is a double-edged illusion. In my mind there are two groups at fault the first being the government's deregulation of the banking practices as well as a neglect or inability to regulate new types of banking practices that have not been dealt with in the past. Secondly, is the high-risks loaning that firms greedily acted on in their own self-interest (as well as the people that knowingly accepted a low mortgage loans even though they did not have the means to pay it; aka greed ). With this multi-blame established how should the problem be resolved? Should it be a government bailout with taxpayer's money?
In my mind, I do not think the government should bail out Wall Street because if I owned a business and made some high-risk choices I would have to suck up those choices myself. However, I do understand that if some of these companies do go under many of their workers not involved with the high risk lending will be kicked to the curb for no reason. Therefore, the people responsible, the board of trustees and CEOs, should be responsible for their inability to produce proper oversight on their lending practices. This does not mean that caps should be put on their salaries or golden parachutes because in my eyes no matter how stupid a business decision is the government doesn't have a right to control the business amount it is willing to give their employees. Do I find it ridiculous that CEOs make about 344 times more than the average worker does for no reason except as a competition with other businesses? Yes, but I am not the business wasting my money on the CEO; well, until the government decides to use my money to bail them out.
With all banter aside and blame established I truly think that are economic problem is really a truth illusion revealed. Meaning, all of the problems created by the many hands of greedy consumption has finally caught up with us and is trying to balance itself out by going back to the point that we should be at instead of the fake one we produced. I want to ask, is it more important to stretch ourselves to a point we shouldn't be at to keep up our economic appearance or should we take a hit and start over to a more comfortable point for real growth?

Sent by Greg | 2:28 PM | 9-24-2008

no bailout! the whole thing is so infuriating, so's just plain *wrong*

i'm almost with the senate republicans on this. i don't want to see our economy collapse, but really, why should we rescue them, when they refused to rescue the people who needed it, who still do need it?

i don't think it will work, even with all the oversight the democracts can throw at it, even with caps on salary, even with ownership in the won't solve the underlying problems.

resolve the problem of all the people who are defaulting, not bail out the idiots who created untenable, unrealistic mortgages in the first place....

let them feel the pain along with the rest of us.

no bail out. period.

Sent by DMH | 2:34 PM | 9-24-2008

I think If we are gonna guarantee Fannie Mae and Freddy Mac, then we should be able to set 30 year fixed mortgage rates at, say, 3%. This would make housing affordable not just for those who are forclosing, but for most any American, and leave enought money in our pockets every month for us to spend and bring the economy back up. Spend 700 billion on that, not on giving it no strings attached to the people and institutions who have squandered and looted and ransacked our treasury and economy.

Sent by Michael Appley | 3:21 PM | 9-24-2008

I am not against a government bailout per se. I do however feel that the taxpayer should get a deal similar to the one Warren Buffet set up with Goldman Sachs. I strongly feel that the government should not pay one penny more than the assets are worth and should benefit when the financial situation improves.

Sent by Nancy | 3:30 PM | 9-24-2008

I am greatly relieved to hear today that Congress is showing some backbone in this tsunami of pressure from the Admninistration to transfer power from Congress to the Executive Branch and to allow a huge transfer of FUTURE (and mainly middle-class) wealth to the wealthy elite investing class of this country, with the Executive Branch as the courrier. I will be so disgusted with Congress if they yield to this pressure, as they did when handed the Patriot Act proposal.

Congress needs to know what the voting public wants. Please report on any general public polls that are being done, or else investigate and report on why no such polls are being taken.

Considering Pres. Bush's adamant opposition last fall to a bailout for homeowners facing mortgage foreclosure (due, in my view, to irresponsible and predatory lending practices), to now favor a bailout of certain investors is incredibly hypocritical. Had foreclosures been addressed last fall, our financial markets would be in at least somewhat less trouble than they are now.

Sent by Joan | 3:35 PM | 9-24-2008

I feel that it is necessary to bail out the banks. I would also give taxpayers equal shares of aig. that way, once the giant is back up and running we the taxpayers would get the benefits that come from being a share holder.

Sent by chulki choung | 4:29 PM | 9-24-2008

I'm suffering from Deja vu. After 9/11 Bush needed the "option" to invade Iraq and this had to be voted on NOW! it was an emergency, and no one expected him to use that power. No one expected Fannie and Freddie to be taken over, either, let's just give them the authority. They'll never have to use it. We just need the "perception" to stablize the market. Also, everything must be done NOW! Once again this administration has made a crisis and is using it to grab power. Please folks, remember history. If we give them the power and or/the money they will use it and grab for more. This financial situation did not happen overnight. We need our leaders to address this crisis in a sober, thoughtful way. Yes, we to need to stem the financial bleeding but can't we handle this in small stages with tons of oversight? BTW, did no one ever think to package the riskier subprime loans separate from the A paper loans?

Sent by Donna Bechet | 4:50 PM | 9-24-2008

NO on the bailout. This sounds like a "trickle down" strategy. Our 700 billion dollars will go to the top where it is expected to trickle down to the majority of US citizens. It sounds too good for the ones who didn't handle money with common sense to begin with. I think more time needs to be taken, why such a hurry AND as now written, without the OVERSIGHT needed. Sounds like more secrecy and a power grab.

Sent by Yolanda Alvarez | 4:58 PM | 9-24-2008

Put $700B in a public works project. Give the American worker a job. The salary yielded from a job created by this public works project will find it's way into a bank or some financial institution. Those banks with the most depositors survive and they provide the capital to recharge the economy through loans, carefully and methodically granted.

Sent by Alex | 5:13 PM | 9-24-2008

I am stunned by the lack of alternatives to the bailout. It seems that those familiar with economics, such as Professors at institions like Harvard and Princeton should be offering alternatives that win media attention. So what if the congress doesn't seem to be listening? If I can come up with the idea to instead use the 700 billion dollars to pay $5,000 to everyone in the nation, which is a third of the income made annually of those working minumum wage in Oregon, surely the intellectual elite have some better ideas. Maybe they need to know that people want to hear what ideas they have!

Sent by Alexis Cooley | 5:49 PM | 9-24-2008

Dear Sec'y of the Treasury
We apparently can quickly find (or borrow) the money to do the stuff the authorities deem necessary, be it war or bailout; thus, we can also find the money we need for investment in people, from health care to education to infrastructure, etc. I was looking forward to having my tax dollars pay for universal healthcare and education improvements in the next administration. I want it as a quid pro quo for shouldering this sack of rocks.
I have a few questions:
If I wasn't so mad I would be LOL'ing at your suggestion that no one can evaluate or question actions that you take. Who is valuing the debts? I dont see your plan providing taxpayers with an equity stake in the firms that are helped. Include measures to force work outs of mortgages and a freeze on foreclosures.
Why not put the money into the system where the trickle down is supposed to go eventually, right off the bat? Why should corrections be avoided? These oversized over leveraged derivatives exposures, debt instruments, weapons of mass destruction need to die. why not let them?
Why should my taxes prop up the bankers hedge managers, investors, venture capitolists? Why not invest in Main St?
Why wouldn't a WPA, a works program be better than a socialized debt managment program? Why don't you let capitolism take it's course? In your plan the market is not able to really correct, the companies who should fall by the wayside don't, the bosses who should look for a new job won't show the changes on their resume the company will still be functioning.
What about this buyout is going to address the foreign bond holders sense of safety? Inflation and dollar devaluation seem much more traumatic for foreign bond holders than hedging leveraged debt with a spending program that puts money right in the pocket of main street people who spend money. The program could be health insurance, that would keep a huge service industry able to pay their mortgages and car loans. And we could start an alternative energy program, biodiesel/solar/wind/geothermal for every house. This would require an education program for installers, manufacturing startups, and research and retrofitting programs.
I think you are not thinking outside the box. And I can't believe you think you can fix something you don't really understand! It's like practicing medicine without having an MD. Force investment, don't resuccitate toxic waste.

Sent by Anne Sotelo | 11:36 PM | 9-24-2008

I hope all the commenters are e-mailing their Senators, and Congressmen with their opinions, and some very good solutions as well, Michael Appley's is very good. Deja-vu indeed, Mr. Bush is fear mongering in high gear again, and things must be settled without recourse to the courts, or common sense. Again. Write your Congress and Senators, many times expressing the refusal to agree to a Bail out, after all, it is our money.

Sent by jmh | 2:37 AM | 9-25-2008

ok, so we are all debating this big bailout as a country. this is the way I see it. We are a nation who likes our credit. We like our businesses to be able to operate in the red, take out paycheck loans, etc. We like our citizens to operate completely and terminally in the red, you only get a credit score by NOT paying for what you are buying when you buy it. What would happen if people had to operate within their means? OH no, we might actually think about sustainability. We might actually consider a budget! OH horror, oh fateful day! OK... it is a normal cycle of business that there are at fiirst lots of small businesses, let's say hardware stores, or savings and loans. There might be one or two in each small town. over the county there might be 12, over the state 1000. Well each old couple that owns one will die or retire and a neighboring business owner will buy their store. This consolidation continues until it is a conglomoland, much like pharohs in egypt. As long as you have a smart and capable business owner at the top it might be great. But there is a tipping point, usually when the owner leaves the business to an heir who has little business sense. They may get by - possibly doing some shady deals or shady accounting, but they manage to raise their kids on grandparent's inheritance. But when it comes to the 3rd generation, they have been raised lazy, expecting everything in return for nothing, and they drive the business in to the ground. The death of this big monster of a business allows for small businesses to step in and restart the cycle. It is necessary and heathly for distribution of wealth, for entreprenuereal spirit, and for our style of free market economy. The LEAST amount possible of interference should be taken by the goverment in order to let the big monsters die and allow us small business owners to grow.

In addition- the housing "crisis" is to be expected. I could have told you two decades ago that this would happen. Anyone with their ear to the ground could tell what was coming. 1) It used to be that people were approved for a mortgage assuming that the maximum going toward PITI would be 25% in income. Then it was 38% to PITI. Then it was 75% to PI only, leaving the buyer to be surprized by TI when the final pmt was figured. Yes, this allowed people to "afford" the more expensive housing, but only on paper.
Now, you are asking what's PITI, right, and that gets me to the other part of the problem-financial illiteracy.PITI is Principal, Interest, Taxes, and Insurance-Principal being the amt the loan was taken out for which deminishes slowly at first, and then accellerates payoff later b/c of the way loans are amortized, Interest being what you pay the bank to use their money, actually supposed to be the money of other depositors at that institution, Taxes being the twice yearly property taxes which are uncapped and based on new purchase price, not the old assessed value of the home-so they'll change from what the seller paid, and Insurance which is required by your bank so that they know there will be money to rebuild their collateral if a catastrophe were to occur. Got that? OK, most people never learn this. Never. WHY? People cannot define ARM, amortization, balloon payment, APY, APR, true cost of loan, PITI-we have a huge gap in our educational system here. Someone is gaining from not educating people on these basics of home ownership. Therefore these "poor people" who are being foreclosed upon are easy prey, and prepared for the feast by a measly education. Buying a house also means taking on the costs your landlord would have to pay if you were renting-things like well drilling (every 20 years), furnace replacement( every 10 years), electrical repairs (whenever), roof replacement (every 5 to 15 years), flooring replacement (every couple years), painting and patching drywall (every year)- This can get to be a huge burden for a person who goes from paying $700 or $800 per month in rent to $1500 per month in mortgage pmts before the ARM starts adjusting. The solution? Shorten the amout of time a bank has to hold a property without payment before selling -all that lost income and taxes due is expensive. Shorten the amunt of time landlords have to wait to kick out a renter not paying also-you see we need to relearn responsibility-you pay your bills or you don't get the benifits. Let the big banks go down. Do the least possible to help them, just buy the houses from the losers who shouldn't heave gotten houses in the first place and give investors tools to buy them and rent them back to troubled families. Give longer term loans to investors 6-7% 40YR - it makes more money anyway, and stabilizes the money flow. Don't limit the number of loans an investor can have. The government learned long ago that individual landlords taking pride in their product will provide better and safer and cheaper housing than that the gov't could provide in tenament apartments. Allow loans on houses that are in rough shape and even providing lower interest rates on those 4-5% 40YR, that gets off the rolls all the houses that have little or no furnace,wiring, or plumbling - because a real investor just looks at those as improvements, they really are not any more costly than new carpet and trim and bath fixtures throughout the house. Remove the ban on secondary market buying manufactured housing, just require an Affidavit of Affixture and drop that whole subject, those homes are built to the same standards as other homes.

In addition- AIG insures risky loans. That's their problem. Banks are required to keep a certain debt ratio, so raise it temporarily and give them a chance to find buyers. Changing regulations is a lot easier on all our pocketbooks than giving cash to people who aren't willing to sacrifice for their business or employees.

In addition- the stock market "plunge"-What, it fell 1% or something-so what? Was it an emergency when it went from appx 10,000 to 11,000? NO. A couple hundred points is really immaterial. You put your money on the rullette table, you win some, you lose some. Tough shit. And what if money markets drop 2 or 3% I think we'd rather have the bill be smaller for future generations and pay a little now instead of a lot plus interest to China later. Let the chips fall. Rich people have money markets, Rich people play with stocks. To think it was ever a blue collar game was niave. It's not. People need to learn this, now is better than later. Here is the albatros that this administration would like to hang on the neck of the next president- a 700 billion dollar albatros, to make it seem like he's a financial imibicile. Don't let this happen. We all know that everything this administration has sold us has ballooned in price and lined the pockets of his personal buddies. Let them starve. Not the American worker.

Sent by chandra | 4:24 PM | 9-25-2008