text:
His concern is bailing out Goldman and ensuring they are the last one standing. He stood aside until Goldman was under pressure behind the scenes (according to my Goldman buddies). This is plain theft. The banks caused this problem by lying and fudging the regs. The guys that broke it are now proposing that we pay for their fix. In addition, treasury will pay huge fees to the same crooks to "manage" the portfolios. The ads for CDO valuators are already in the NY Times. Let these institutions fail. If you want to protect the little guy by upping their deposit insurance fine. After that, go full on and put these guys in jail if it is determined they didn't value their CDOs according the banking regs. Don't let these guys fool you, they are (with some notable exceptions) really bad peopoe.
Your comment about giving Paulson what he wants as to executive pay:
"Paulson gets that. He knows that money and fear are the only two things that motivate these CEOs. And that he will have to bribe and bully them into accepting any sensible bailout.
This is why Paulson is resisting Congressional proposals to cap executive pay in the plan. And why he will fight the Democrats' efforts for the government to take equity in any bank that participates in the plan."
These CEOs do not care about shareholders. They never have. They care about putting money in their own pockets. Any plan to bail out these companies should specifically prevent the top brass from getting any more money AND get back the bonuses they fraudulently gave themselves over the past 3 years.
It should probably include jail time for many of the top executives who knoew what was going on. Paulson at Goldman Sachs was one of them!
Are you just blindly following this guy to the lava pit? This guy along with the other guy(GWBJr.) got us into a financial mess with the cost of the phony Iraq War and now we are supposed to just cozy up to his plan. Where is the alternative thinking? Not from you I see!!
Bravo, Evan! Couldn't agree more — give Paulson the power! Save our financial system.
Why should he fight against the idea of an equity stake in the companies being bailed out? Any company that truly needs the funds shouldn't balk at this provision, and any company that balks doesn't need (or deserve) the funds.
Get off his jock Evan – you're not going to get your Goldman gig back.
Can't Uncle Sham ban selling altogether?!
Paulson has a decent plan but it must be supplemented by the wage caps, the give back of ill gotten bonuses, the oversight that will somewhat insure that the goldman and hedgefund boys do not reap the harvest when the gov't sells off the discounted bad loans at prices which will make the middleman get rich. What we are fighting for here, with these big institutions, is who makes billions from the labors of taxpayers who are funding this bailout.
Couldn't disagree more. This will help I banks, no doubt. What makes you think it will avert crisis? I think it will make crisis worse. It certainly will reward the bad actors, at taxpayer expense. Shouldn't the officers and shareholders of these banks be the first to ante up. Shouldn't the banks that didn't engage in shenanigans be allowed to profit for their prudence? This Paulson's Folly and I WANT NO PART OF IT. LET THEM FAIL. THEN WE CAN REBUILD.
John your comments show your intelligence. Greedy homebuyers and a do nothing Democtatic Congress is the problem – Not the President – remember he does not pass spending laws.
–"So why not give him whatever he needs?"–
He wasn't elected to office.
We trusted Colin Powell when he said Iraq needed invaded RIGHT NOW.
After epic incompetence at money management – what makes you think that 700B won't be squandered?
GET SOME integrity for a change by not voting for the evil and counter-constitutional Paulson Bailout. Now that the A-deckers have rammed the Titanic into the mother of all icebergs with their credit default swaps and collateral debt obligations Paulson plans to build them a luxury rescue yacht while sealing off the lower decks except for suctioning as much cash as he can pirate up. NO! NOT THIS TIME! NOT THIS WAY! Tell Bush/McCain/Paulson and the other swine of their ilk to eat the CDSs and CDOs themselves.
Beware taxpayers.
Trust in God..if you must.
But these guys are going for the whole house!.
John your comments show your intelligence. Greedy home buyers and a do nothing Democatic Congress is the problem – Not the President – remember he does not pass spending laws.
Scott at 3:20 nailed it.
Mitsubishi isn't just giving Morgan Stanley good money for bad debt. They are getting a share of the company. That's the free market and capitalism, or at least it was two weeks ago. So if the U.S. taxpayers are going to give good money for bad debt, they TOO should get a share of the company taking the money.
Or is this concept too difficult for a "free market" guy to understand?
And if compensation is truly for performance and failure — as Paulson says it should be — then there is no reason these executives deserve anything other than minimum wage. If their company had PERFORMED, they wouldn't be in the trouble they are.
Or does "performance" have a different definition in Wall Street Speak?
The author is an apologist for naked greed and sheer incompetence of Wall Street. I say throw the bum CEOs out without pay, make them pay back their bonuses and let the companies fail. We're going into a deep recession anyway, and trying to minimize it by throwing good money after bad will only prolong the pain.
If you think these plans will solve our problems, you are dead wrong.
The only solution is to let the markets play out, let the banks that took on high-yielding assets in the name of more profit fail.
Otherwise, these artificial schemes to prop up the market will only delay the healing process. Think Japan – where the economy and the equity markets have been in the crapper for 15 years.
The same will play out here in the U.S. if these politicians do not grow backbones quickly and pander to the headlines.
The Messiah will take care of everything come January 2nd —- Just keep dreaming folks.
A better solution instead of recapitalizing the banks with my money is to change the accounting rules to value the assets at their long term cash flow value – not at what the crooks think they are worth today.
The financial professionals should take their own "buy and hold" advice, instead of churning deals to get bonuses.
Note, also, that there is NOTHING in this bailout plan to prevent the same companies from doing the SAME THING next month. Where is the reform?
First the constitutional rights of this country were trampled on based on some manufactured external threat. Now our fiscal rights are getting trampled on. Not REVIEWABLE? are you kidding? This is a BLANK check for Wall Street to get rich all over again ! Even if Paulson is an honest guy, what checks and balances are there to prevent him from being bamboozled, or better still get replaced by a lackey of the banks? NO CHECKS AND BALANCES SHOULD MEAN NO MONEY FOR THE BANKS from the treasury PERIOD !
Change the accounting rules to value assets at their long term cash flow value, instead of what they think they are worth this minute, i.e., Wall Street deal churning value.
They tell us, the avergae investor, to "buy and hold."
Why dont they do the same thing, instead of churning deals for their short term boonuses?
Help is on the way… When the Clueless Evengelista from Way-Silly becomes President and replaces the constitution with her bible, she'll fix everything. Just as long as you pray to god every waking hour — and you will be doing just that as you start wishing that the Shurb was back in charge after the disasters she will create.
The homeowners need to be included in the equation but not those who already filed for foreclosure and abandoned their homes but those who are still in their homes with interest and adjustable rates mortgages. If they don't receive any help now they will be in foreclosure soon. Their mortgages' loans need to be adjusted to the actual market price of their homes and be fixed for 30 years at 5.0 interest rate. Let's save the American Dreams for those still holding tight to their homes. This measure alone will reactive the economy again.
No way!
Wasn't Paulson the one who reassured the financial markets were a-okay time and time again and has repeatedly contradicted himself within a matter of hours or days in the past.
Fannie and Freddie are fine, a takeover weeks later. No more bailouts. A bailout of AIG a day later.
Paulson had ample time to suggest reforms earlier, chiefly between the months of March to August. Now he is desperately trying to push through "reforms" totalling $700b. No way.
Paulson cannot be trusted. In addition to his contradictions and outright lies he owns a substantial stake in Goldman Sachs, one of the very financial firms he is helping out with this measure. How can we be sure he has the average American's best interests at stake and not his former employer? Paulson should resign as his former position and substantial GS holdings give a huge appearance of impropriety.
How he was ever appointed is just another judgement failure by our 'genius' president.
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
The calm and less hysterical approach of Democrats in this issue is telling. Why should the American people take it on the chin without any concessions from the engineers of the train wreck?
There's a logical progression here that does not involve fiat royalty in the Treasury department and includes the taxpayers in the profits derived from this salvage procedure. We already made a great return on our AIG investment. While this can ultimately work out well, we just can NOT ignore the underwriters of this venture.
People are pretty sick of this, and it appears today that only the Democrats are aware of this.
I don't see this going down well with anyone outside the financial cadre that brought this fiasco to us.
Fair warning to those insulated types on the Street.
This 700 Billion is a mere temporary band-aid to shore up companies with over-valued stocks so the Wall Street fat cats can "cash out" and leave the taxpayer to pay the bill over the next 20 years. 700 billion will not prop up the multi-trillion market in over-extended credit, and overloaded debt the USA has run up since 1985. The Dow needs to return to 7000, and THEN a gradual return to growth matching GDP growth, if we have any.
Evan – you know you've advocated a ridiculous idea when barely one person endorses your position.
On a somewhat related note – you act as if only Democrats are scared by this bailout.
You also ignore the fact that Paulson sat on his $2000 suits for a year and a half before he pressed anyone to do anything. How is he qualified to save anybody? Get a grip Evan.
I agree re: executive pay and shares in the banks. We need to eliminate disincentives to participate in TARP.
Punishing banks with significant dilution and punishing CEOs by cutting pay discourages participation in the plan and encourages banks to hold on to toxic sludge.
We need equity capital in the banks (bank lending is limited by the amount of equity capital available), and no one wants to pony up cash for bank shares to help them recapitalize if dilution is hanging over their heads and until they are sure the treasury's plan has been fully utilized, all of this crap is off the bank balance sheets, and they are sure writedowns are over.
Otherwise, equity will wither, we'll continue to have a deflationary contraction of credit and we're all screwed.
I hope congress doesn't screw this up or we'll end up like Japan (tried lots of ineffective "rescues" in the 90s after their RE bubble… all they got for it was 2x GDP in national debt and 40% of their tax revenues going to pay interest).
Maybe, it is time to move away from this form of capitalism. Our nation's economic well being shouldnt be built on a house of cards.
Perfect. Give Paulson de power. Just do it. Now, before people ask for the cash to the banks.
Well written Evan
Three chears for Evan, another brave defense of the rich and powerful and criminal. And now the free market fakers come crying to the government for a bail-out. Socialism for the rich and capitalism for the poor. With Evan the idiot cheering it on every step of the way.
What an offensive spew of anti-American garbage! I'm shocked. I mean, this is just a blog, so I suppose an edgy opinion is what the editors seek but this really goes too far.
this author is a retard. Go sell your garbage in China you communist! WOW can you believe how hippnotized some people are? To think this man has enough power to release an article like this! I really think Paulson should be shot down. Another thing, I think that we are seeing the break up of America! Why did we seperate from England? Taxation with out representation right? Well, if this isn't taxation with out representation, i dont know what else is. The market needs to fail! Let the banks fail! Lets return to capitalism, a system that has been proven to work. Not communism which doesn't work. WOW…china even knows that now.
Give him what he needs? Enough already. Discussion with congress is a good idea this time. We don't trust the Bush administration. They lie. They shade the truth. They've hurt our country. Hank Paulson may be a key player but he's on a bad team. I'm a voter and a taxpayer and a IRA holder. I want punishment for the guilty, and I don't want windfalls for the foolish.
One word: Plastics!
Must disagree with Evan here. Inflationary consequences are worse than liquidity consequences over the next few years. Already, oil spiked $25 and Euro started rising again. And this is before the MOAB (mother of all bailouts) is put to a vote.
Barney Frank is in his 14th Congressional term. Chris Dodd is in his 5th Senatorial term. How much culpability lies with these two?
Paulson Action nothing more than Corporate Welfare – same as Food Stamps, CHIPS, Arms for Georgia we need to STOP ALL WELFARE — for Mor goto: http://www.associatedcontent.com/article/330587/why_we_need_to_stop_the_welfare_madness.html?cat=47
Paulson is probably more trustworthy than the rest of the administration and Congress. Nonetheless, he has had over a year to see this crisis coming; yet, he had no plan ready. He was forced to react quickly in the face of a crisis. I question his decision-making ability. And that makes his solution suspect.
"Paulson may actually fix the mess WE have made. So why not give him WHATEVER he needs?" WE didn't create the mess … WALL STREET financial engineers and GOVERNMENT lackey regulators created it. I and my fellow average Joes who hold stocks only in our now-close-to-worthless IRAs and 401Ks certainly didn't. So the greedy WS bastards have no business expecting me (or my kind) to bail them out any more. There's NO reason for Paulson, Bernanke, Ripoffs, & Co to be BUYING once cent of toxic crap. Instead, PBR&Co and regulators should MANDATE that EVERY piece of toxic crap be put in a BIG pool and then oversee a world-wide auction of EVERY last crappy item in that pool to willing buyers. No reserves. I guarantee EVERY last piece of S— WILL be bought by someone. Then let the sellers mark down their balance sheets by whatever they lost and LET'S ALL MOVE ON. The rule should be that there better not be ANY toxic crap to emerge later that wasn't submitted to the pool — or else every officer & board member of the offending institution gets thrown in jail until the leftover is disposed of in a subsequent "penalty" round. PBR&Co have NO idea what the crap is worth … so they have NO business buying anything with a blank check from ME. Do the good 'ol Republican thing and let the MARKET (distressed sellers & buyers of distressed crap) work its unencumbered and unguaranteed magic without MY involuntary participation.
Headline seen in the Washington Post, the day after 9-11: "The important thing to ask when the world is burning, is what's being born?"
One word describes our banking, real estate, lending, wall street thinking: predatory. Brother stalking brother, deceit, ambush and financial murder in the name of profit.
In a way, this whole meltdown is inspiring, because it is a blank piece of paper, from which we can sketch a new way of doing things. God help us all if we do is re-create a mirror image of the existing system out of the ashes.
Watching in Iowa
paulson payroll: GOLDMAN SACHS GROUP INC 2006 USD 345,769 18,700,000
Evan Newmark is the same writer who wrote that the demise of Lehman Brothers would not matter. Makes me wonder. Looks like Newmark was hasty. Fear spreads. Panic spreads … Recall: Bear Stearns … Lehman Bothers … AIG … $700 B.
The problems got bigger …
If a small financial problem is solved properly, then the bigger problems are perhaps also solved …
It's ironic that the free market shills are all clamoring for a giant socialist bailout. I'll take my chance with bank failures thank you very much. Not a penny for bailouts!!!!
Please, everyone, let's just turn the keys over to this drunk-with-power, unaccountable administration. They'll take care of us, honestly. Give Paulsen the power. Then we can all say MISSION ACCOMPLISHED and head off to our homes in the Hamptons before the looting begins…
I guess you won't have anything to write about if this doesn't work. So I guess I see your motivation in support of giving Paulson a blank check.
SOmehow it just doesn't really make a lot of sense. I bought a home and went into a 30 year fixed rate load (about 5.8%) but there are calls to bail out 1) the institutions that played fat and loose with a lot of bad debt, and 2) irresponsible homeowners that bit off more than they could chew.
So not only do I NOT get any help paying my mortgage, I have to contribute to bailing out folks who recklessly screwed this economy up, have to give up ANY say in how that bailout is handled, andpossibly help homeowners who are not able to pay their bills.
What is wrong with this picture?
But Mr. newmark thinks I'm "lucky"?
This is just another attempted money grab, and there's not even an attempt to hide that fact. And as usual, it's the regular little guy who in the end will bear the costs of this while the politician and big $ executives ride off into the sunset all taken care of. Maybe even the rubes who can't apy their mortgages…in a word, everyone who screwed up in this deal gets rewarded, while the responsible ones get the shaft.
What a crock of crap.
I completely agree with Evan Newmark. Give Paulson the power. He has the experience to fix the problem. It is not the task of the Federal Government to own part of banks. Just as the Fire Department does not want to earn burnt-down houses but just puts out the fire. The same here. The Federal Government are here to ease the transition into a new era.
Whenever I borrow money from a bank I have to put up collateral. Now, when Congress basically wants the same thing they balk? I do not trust this deal as far as I can throw it. Watch and see those guys give themselves big bonuses for "managing" the bailout.
What complete nonsense! Secrecy and unchecked authority have no place in a potential bailout, any more than the arrogance and distain for Washington's help "with rules" while holding out the beggar's hand. "taxpayer, just give us the money and we'll look after your interests."
I hope Congress does its Job this time vs. being a stupid rubber stamp for crazy executive branch that has lied us into an expensive war that ahs cots us over 4000 US lives and ten of thousands of Iraq lives.. I do not trust him at all.. I wish I can take my toxic investments and sell to the govt..
'(Paulson)knows that money and fear are the only two things that motivate these CEOs. And that he will have to bribe and bully them into accepting any sensible bailout.' What?? I have an idea. Let's not bother. Save our money and they can dig out themselves….Who is this guy? Give unmitigated power to Paulson?? Can anyone say 'unconstitutional', or is that a stupid, outdated concept. And BTW, no one knows who will replace Paulson in a mere 4 months. Are you still on board with that Evan?
Paulson has been wrong every step of the way. This praise is just a naked PR effort:
- He sat in Goldman creating the toxic mess, bailed out with $ 600 M tax free
- Slept at the switch while the crisis was brewing
- When the crisis erupted – - small problem, sub prime only, contained, worst is behind us, well capitalized institutions
- Give me a bazooka –I will not use it. That bazooka mis-fired
- After Bear, Fannie, AIG – he now wants a trillion dollar Nuclear missile. He wants unilateral unsupervised power
He is destroying capitalism and free markets in front of our eyes. He should be fired, not given additional power and a Trillion $s.
Paulson is acting like an operative for the banking industry. He cannot be trusted.
Good job Even, you got the traffic you wanted with this idiotic piece…
Support for the bailout as Paulson proposed it exposes the intellectually dishonest free-marketers for the hypocrites they are! The free market absolutely depends on failures failing – remember creative destruction? Paulson calls it punitive to require the guilty to pay – hey, he's taking away the free markets way of making them pay, so what's wrong with coming up with another way? They should pay!
How many shares does Paulson have in GS and Morgan stanley? Is there any Conflict of Intrest?
Let the system fix it dont change the system !! and "Assume" it can be fixed !! Its not end of the world!! America is more resilient and so is its Economy
Loosen your Headband Kumar
Who is paying you to write this trash?
Its like a re-run of prepping up people about the urgency of war on Iraq.
Wipe your nose kid!
What would you do if your kid comes home and says "Dad, I totaled your Cadillac. Wrecked, gone, kaput. Where is the whiskey and the keys to the Porsche?"
Bailout in a pig's eye, this is not a Communist country. Let the smart jocks who got themselves into this mess bail themselves out.
If there is a true need for a bailout, then do NOT put an ex-Wall Street insider in total control. There must be Congressional oversight, limits on compensation, and a good, sound butt-whippin' for those who caused this mess.
Any solution to this exagerated and contrived crisis is to bail out the actual perpetrators which include : lenders that took excessive risks, hoping they could pass on the problems to others via securitization, regulators and politicians that were rewarded to look the other way, and applicants and borrowers that accepted credit knowing they could not afford it. Now it is all neatly packaged in a bailout by the taxpayers and all will be quickly buried by Congressional hearings with politicians posturing that everything they do, they do it for the "people".
Paulson is a financial predator.
To put him in charge of the mess he created is akin to putting a known child molester in charge of the kindergarten class.
Evan, You said:
"Wasn't the original problem that the homeowner couldn't afford the house? "
Well, no — actually it wasn't. The original problem was that the banks got greedy and decided to make loans that they knew would never be repaid — and then their accountants tried to hide them in off-balance sheet entities called SIVs. Then, their auditors and regulators looked the other way…
The problem is not that we had a housing crisis or even a credit crisis. The crisis is greed that got out of control because Bush's Free-Marketeers condoned it. Didn't his head of the SEC take a vacation the weekend that Bear went under?
So, if the Bush administration blew it the first time by not performing their regulatory jobs — and they have a track record of asking for complete control and then abusing that control — why should we turn complete power over to them yet again?
Our government only works with checks and balances intact. The kings and dictators in the White House have proven that.
Could someone tell me just how big the bullet was that just whizzed by?
How bad could it get?
I heard a trader this morning talking about riots in the streets and nuclear incidents. I am not prone to drama, but looking at some of the anger in the streets, I am beginning to wonder.
How bad could it actually get?
Signed -
Watching in Iowa -
Assuming that the author is correct and Paulson is the Wizard of Oz, everybody knows the Wizard's leaving the Emerald City in January for St John. And then who takes over? the scarecrow or the tin man? Long live the USA; it was good knowing you.
Welcome to the fascist state of america and your new financial dictator.
I think this article is a joke. It must be. You can't be serious, can you Evan?
This bailout is a montrosity!
In sorting through this financial catastrophy, there is a party that has not been implicated, who should accept some of the blame…the homeowners. Yes, I do believe in the American Dream but at what expense. Why should the rest of America assume the tax burden of the irresponsible borrowing of those who chose to bite off more than they could chew?????
Yeah, that's what our founders said all right:
"Give me liberty or give me a financial system that stops just short of robbing me blind."
Distinguish between TRIAGE and AMERICAN IDOL. This is the triage part where you clamp off the major arteries and save legs, arms, etc. The public executions can come later. And being the good political fodder that witch hunts are, they certainly will pay CNBC coverage.
yes, yes, talking sense. thank you. Evan
why is it that there is one of you and dozens of other commentators who have no clue?
hey Scott here's some help with your question:
Why should he fight against the idea of an equity stake in the companies being bailed out? Any company that truly needs the funds shouldn't balk at this provision, and any company that balks doesn't need (or deserve) the funds.
the Paulson plan says that the gvt buys these assets the same way that any private buyer in the capitalist system would buy them, with risk. that the gvt then has complete discretion as to how and when they re-sell the assets.
the 'warrants' proposed by Dodd/Shumer would only work one way, if the re-sale by the gvt at the discretion of the gvt is at a profit to the gvt, the warrant expires worthless. if it (the re-sale by the gvt at the discretion of the gvt) is at a loss, the firm that sold the asset to the gvt then needs to pay back a portion of the original sales proceeds.
lets use the recent merrill sale of some of this junk as an example (22 cents on a dollar for CDO's). that's not some number i made up you can research it yourself.
if the gvt can not get 22 cents on a dollar for collateralized mortgage debt two or three or five years from now, the whole private financial system is going to be nothing more than a steaming pile of s—. meaning that these banks are not going to have the cash to repay those losses anyway. if they do, where do you think that they are going to get it from? hahahah, borrow it from the gvt.
they need to get this stuff off their books now so that they can stop looking at it every day and stop waiting for someone else to mark it down another 50% in some desperation move. or mark it to zero in a liquidation.
once the gvt owns this stuff, the banks get back to doing what they do, lending/borrowing not being paralyzed with fear. real buyers who can afford real mortgage terms become willing to take risk on home ownership and the market stabilizes. the gvt then is able to slowly and fearlessly
liquidate the assets they bought in the panic fire sale at cost or better. redistributing the risk around the globe. retiring gvt debt created to fund it.
how is that not clear? there is zero benefit to adding an albatross that weighs this thing down and prevents it from getting done today. those provisions are all about Dodd and Shumer getting re elected to their cushy jobs not about protecting the american tax payer. these proposed 'equity stakes for the gvt' do nothing more than guaranty the downside for the taxpayer in a different form and do zero for the taxpayer if there was an upside.
in fact the current Paulson proposal is pure capitalism (Hank Paulson as the financial representative of the taxpayer, agrees to risk taxpayer money on financial assets expecting to profit) while the Dodd/Shumer equity stake proposal is socialism (forced government ownership of private business).
do you think that they are better/smarter finance guys than Hank Paulson???????????????????
if you can't find a pair of shoes that you like that's no reason to cut off your legs.
sorry to plagiarize recent political commentary but it fits here.
You are a terrible reporter. Blank check? I don't think so. This mess is happening because of deregulation in our system. Would you provide your blank check to someone?
This bill is a blank check; robbing from the poor to pay for the rich.
Two words I find very interesting with respect to George Bush II:
1.) Impreach
2.) Indict
Not in that order either.
We had the same problem with Mr. Reagan and his culture of "economic freedoms" and "trickle down' economics. Republicans don't raise taxes, they gut the economy and cover for their corporate cronies by having tax payers foot the bill. At the time, Reagan left us with the bigest deficit in history (remember the S&L scandal?) but W. is going to beat it by far.
Throughout history capitalism periodically needs large infusions of capital in order to sustain itself. World wars, takeover of other nations, etc. This bailout is another form of capital infusion, directly from the pocket of the citizens. Paulson is right, if you don't give some of your cash away to these entities with insatiable appetites, then they will take their ball and go home and believe me, it is their ball. We need to modify this system as it is taking more and more capital to keep the system working. Pretty soon, it will demand the shirt off your back.
I haven't seen these people get anything right. Will this bailout be a sudden flash of brilliance that will break the loosing streak?
These banks need to collapse, that's the only way to put loosers in their place.
National deficit is killing the dollar value. Crude went up $25 a barrel in a single day today.
Utter nonsense of an article! Just because he knows how wall street works does not mean he can fix it. The shareholders and bondholders must be made to pay before the taxpayer. If it means, owning these institutions, be it! The CEOs made millions and ran away. We can't let the CEOs next in line believe that they can do the same. There need to be consequences of failure at such a massive scale, both for investors (share and bond) and management. If they don't like it, they can sit out and enjoy bankruptcy!!
At times I feel, Paulson and Ben are the only 2 sensible guys around to get us all out of this mess. But then the results doesn't show that they can help us either. In July, he asked Congress to give him bazooka but he won't need to use it. He had to use it and bailed out FRE/FNM. Now it appears that even bazooka is of no use. So he is asking for a nuclear arsenal. What if he need to use it? We all will be wiped off.
My solution – give him money but lock up all CEOs' (that he bails out) and himself UNTIL this crisis is over.
Put the emotions aside! As a taxpayer, I want:(i) the us financial system to survive and (ii) the US Govt to MAKE MONEY on this "bailout of the incompetent bankers". That means: (i) the bad paper must be bought at a severe discount; (ii) the govt must have upside (e.g., warrants) in the institutions that it bails out; and (iii) there must be a mechanism to salvage the discounted mortgages, and in turn the related real estate markets, for homeowners that have a realistic chance of making a go of it. This is not Russia – Paulson (who has performed capably so far) cannot be Putin. He must submit to oversight.
We've allowed Wall Street to privatize their profits and now we're going to socialize their losses. Said another way, Congress: I'm going to Vegas and when I lose, have the folks that stayed home (cause they have paid their mortgages and didn't get hoodwinked by the real estate agents and mortgage brokers) cover my losses! This is INSANITY! Would you teach your child to manage their money this way? If so, get on another planet! When you put illiquid assets (real estate) with liquid ones (securities), you'll have what we have at our doorstop: economic upheaval. Let these damn banks fail and those who created this mess lose THEIR HOMES!
This clown is supposed to work for the American people, not for his buddies in Wall Streeet.
Fire the SOB!
Sorry, but for more than a year now Paulson has been a step or two behind the game. Hard to argue that he should be "trusted"!
Even now it's not clear how the 700B is going to save the system. Is this going to buy the bad assets at a high price so all highly leveraged institutions (e.g. hedge funds) become viable again? If not, this is only creating a delay until the next round of failures! If so, the taxpayer is picking up an ugly tab — better to do what they did with AIG.
Why is no one reporting about Bank of America online access being down since this morning?
Already the lobbyists are trying to influence the shape of the bailout to protect their paychecks. CEO's caring about shareholders like Yang at Yahoo? Mozilo caring about home buyers once Countrywide funded their loan? Homebuyers lying about their income to purchase a home in a hot real estate market? Mortgage brokers putting people into more expensive but more lucrative loans? I'm on a first name basis with all of them.
there is censorship on this forum
"Be Quiet and Give Paulson What He Needs"
Evans, who do you work for?
This article cannot be called 'Journalism'.
How about this compromise? No bailout, either to companies holding mortgages or to the households with mortgages they can't afford. This also solves the compensation issues as the FDIC and bankruptcy courts are forced to put creditors first.
Hey Evan!
Did you get good $$$$$ from your big dadies Bush, Paulson, and Ben to write this? Or you wana piss people due to your lost on the market?
I can't believe how people are rationalizing CEO pay. I am all for free markets but when players fail in the markets and BEG tax payers to bail them out then they should play by their rules. The point that CEOs won't participate in easy money if they don't get paid big bucks only shows how incompetent the board for these companies are. The fact that these companies are out there BEGGING for a savior should be enough to FIRE these incompetent highly paid CEOs.
Overall I think this is total waste of tax dollars to prop up insolvent institutions. The government should go open these books and close the insolvent institutions down ASAP instead of proping them up and delaying the inevitable or creating an even bigger asset bubble. Let the strong prevail and weak ones falter. Paulson is using scare tactics to pass an unnecessary legislation and a 4 percent correction is not an abyss.
Paulson showed who he is working for (i.e., Wall Street and NOT Main Street) when he is adamant about making sure his friends are rewarded for their incompetence.
By pissing on the taxpayers with this bailout, it's now pretty clear what "trickle down" economics means…
I do technical and fundamental analysis on stocks. Read all the fancy magazines and keep up on company earnings and balance sheet. Now the 800 pound gorilla, the US Govt, is trading against me. Govt. Lawyers and staff are tipping off their friends to take positions even before the news is announced. They are using my tax money to beat me up in the market. What is an investor to do?
Hey George
Comment by George MacDonald – September 22, 2008 at 4:13 pm
The original problem was that the banks got greedy and decided to make loans that they knew would never be repaid
Don't be clueless. You say that these guys, the bankers, were able to predict the future and knew that they were creating a disaster and they then just sat there and watched it happen.
Stop. The fact is that they were wrong because they're no smarter than you are, just better at seeing angles and feeding on common human faults that people in these positions have been feeding on since the days of the alchemists.
If you were paying attention you would be able to point out how wrong these guys had been on the way up and then understand that in reverse, it (how wrong they can be) just becomes apparent. There are no financial geniuses, just people proficient at exploiting human weakness.
Greenspan laid out the cheap credit, fueled the individual greed that made it possible for these products to be created (greedy clueless home buyers and flippers/greedy and clueless bankers feeding the buyer need) and sold and while it was all spinning up, no one cared, no one wanted to stop the music, no one wanted accountability no one wanted to put an end to it. It was the great american dream. Laughing at the Japanese who did the same thing and had it all blow up on them twenty years ago. hahahah people would say.
Same exact scenario and platform that created the SNL mess.
What Paulson is saying is, let's not let it end the same way. Let's end it right now in the best controlled way that it can be ended in.
He's not a social reformer, but he understands how to save us from our own ignorance more than the rest of the crowd out there does. Let him work.
You are saying that Fuld was willing to use thousands of employee's at Lehman simply for personal gain and now sits there somewhere smug in the satisfaction that his entire plan worked. That he profited enormously and ruined the lives of thousands intentionally? Get a grip George.
No one is that smart and few people are that evil. But plenty, including you are wrong and sometimes able to profit from that wrongness.
Evan did you say to give Paulson "naked, ugly dictatorial power" with this measure?
Evan, in case you missed it, our Founders gave us a republic and I want to keep it that way. You have revealed yourself to be a socialist of the highest order. Where is Ron Paul when you need him?
While Paulson is certainly a competent and intelligent guy who probably is capable of steering us out of this mess I think you're getting a little carried away. He's obviously going to oppose pay caps on Wall Street execs seeing as how he was one of the highest earning execs ever, and most of his friends are also the highest earning Wall Street execs. Are you seriously expecting us to believe that this wouldn't bias him in the least? That it doesn't bias your own judgement?
I have nothing against Paulson-I think he should get most of what he wants without too much intervention-but while I respect pretty much all GS staff (since they're genuinely dedicated people) I don't expect them to be superhuman saints above personal bias.
this guy is right on the money.
Quiestion: we have a document called Constitution of The United States. What does it say about "dictatorial powers", bail-outs and government takeovers?
"Last week, we did our best to destroy the financial system but somehow came through it."
Time for reality check.
Last week, YOU AND OTHERS FROM THE FORMERLY KNOWN AS FINANCIAL ELITE did your best to destroy the financial system but somehow came through it.
Matthew –
You are right of course.
We need a better system, because this one isn't working too well.
Watching in Iowa
You're saying give Paulson 700B and let him decide how to spend it, with no review, no recourse!!! What if he decides to give some 100B to Goldman Sucks? We cannot reverse it, we cannot idict him, where is the justice here ???? What about his CONFLICTS OF INTEREST ?? WHAT ABOUT IT ? Most of his wealth is tied up in the same banks he wants to rescue !!!!!
$700 billion to keep the economy going? OK.
To the same financial institutions that blew it? NO.
Do not bail out banks that gambled during the housing bubble party. Provide fresh, ample credit lines to banks, nationwide, that have the best, verifiable ratings and a solid track record. Many of them are smaller, regional banks, that are better equipped anyway to react to the local situation and local conditions. And to assist families in trouble. They will, in turn, grow and hire some of the newly unemployed bankers. Monitor the banks closely to prevent abuse.
Let's go back to basics: "You need a loan?" — "OK, tell me who you are, and show me what you got."
If the plan calls for stakes in every company this plan will fail. A few companies on the edge of bankruptcy will give in, but what about the rest? They will hold on…and stop lending! And were back where we began.
Ho hum, half the world could eat better on just what we Americans toss in the garbage every day. 5,000 sq foot houses for two people, $45,000 cars, $20,000 dollar weddings, big screens in every room, vacation cruises, closets filled with clothes and shoes…the American dream is about to come crashing down.
Nice…he knows the guys are corrupt so he needs alot of money to motivate them… hmmm here is some motivation…JAIL TIME. Look you giving money to prop up a system that is flawed in the first place is really idiotic. Let this bubble burst…count the crooks…but lets not drag this sham of a financial system on. The deriviatives alone…who the hell knows the value on those??? Blank check?haha of course he wants a blank check…but not because he wants to bully dimwit but because he needs it…the truth is he doesnt know how far this rabbit hole goes.
You can't keep printing money to pay off bad debt! Congress also has a moral obligation to keep the dollar strong…monetizing this is going to turn a bad couple of years to a bad couple of decades. When is everybody going to realize the market always wins…always.
Their are other ways for alleviating this…hmmm bring back the troops and cut all this bs foreign aid crap and reduce these "oversight" commitees.
Does anyone think having our dollar backed by bad debt good for us???? Am I taking crazy pills?
Pushing through a 700 billion dollar bill in less then a week which is only 3 pages long????
nice. Mr. Newmark you are insane to right such a ill informed article blatantly agreeeing to shell out money to Paulson…by your own admission an awkward banking guy…ahhh yes give the money to the bankers they will know what to do with it…right.
According to news reports, Paulson's stated reason for not wanting the executive compensation caps is a fear that institutions unwilling to accept this provision will decline to participate. What's wrong with that? The spreads on their credit default swaps will skyrocket and they will go out of business — if they prefer that alternative to capping executive compensation, then they DESERVE that result.
Looks like progressive taxation is going to make a come back.
Is this guy serious? He really thinks this is going to work, eh?
Our government has had more than it's fair share of blank checks during this administration and what have we gotten for it? Nothing. The same thing we'll get out of this.
I first thought this was a satirical article – but Evan honestly believes in this plan.
Sweetheart – you're planting winter grass before the autumn leaves have even begun to fall.
Silly man.
Paulson = GS
GS = Paulson
They deserve to go bankrupt. The good assets will be picked up by vultures and life will go on. Yes, there will be temporary pain but the system will correct itself and this will never happen again given a this severe a punishment. That is how capitilism works.
Paulson loves the fear part of it. Just like a used car salesman…"only one left at this price. Come on, make me a deal."
Congress needs to stop and think about it. That is what they are suppose to do. Has anybody heard of checks and balances?
Don't let these criminals heist even more. This time from the public trough…we should all know better!
Isnt' this what they wanted all along? Starve the beast…? Go back and look at 50 years of Neo-Con writings. So now all the money will go to the chosen few in private sector – isn't this just swell? They know they are out of power after this election, so they put the money in private hands and they will run Treasury from there …because they hate McCain and, of course, they hate Obama… So they take away the money from government. This is the largest transfer of wealth in the hisotry of the US. WAKE UP. WAKE UP. WAKE UP. And SOUND THE BELLS…. this ship is sinking
Evan Newmark – stop drinking the Kool-Aid! Paulson does not remember you from GS days and won't be taking you for golf with the soon former President. If you are so shrewd on other Wall Street matters why are you pretending to be so naive on this one? Paulson wants to play kingmaker and clearly has a self-promoting agenda in his schemes. He can't exactly let MS and GS go bankrupt when they are his bankers. Paulson is a hypocrite that makes exceptions when it helps himself. You are just his shill.
What is this "we" you speak of? I didn't vote to give the Federal Reserve and the Treasury the powers they have already amply abused to in large part create this epic disaster. I didn't sit on the board of the companies that made all the dodgy loans or repackaged them or "insured" them or sold endless derivatives off them. I didn't remove regulations on banking that have been in place since the Great Depression or vote for those who did. So exactly how am I or the vast majority of my fellow Americans responsible for this? Why should we be saddled with the toxic debt and literally without known value instruments of every financial house in the country and not a few foreign ones? I say we tell Paulson and company to stuff it and we take away the power of Congress and the Treasury to spend the wealth of the people, in many cases before it is ever created. Enough is enough.
Giving dictatorial powers to someone to maybe make it better at the cost of at least $700 biliion (likely an order of magnitude more) is the most grossly irresponsible thing we can do.
Let`s ask Warren Buffet or Mr. Walsh. Let them take over
So let's play this out.
A bank is under attack. It's flailing. The days and hours on running short.
Paulson goes on the news and tells the shareholders that we, the Feds, are here to buy your toxic stuff. But the CEO won't sell it because he'd have to take a pay cut.
They call an emergency Board meeting. Fire the CEO. Hire whomever to steward the ship (the governor of Alaska is surely qualified?), and sell the assets.
We, the taxpayers, are strengthening his hand. Paulson and you Republican hacks think it's punitive to be asked to make, say $300k per year, for doing a wretched job.
A pox on all your houses.
How would one judge level of honesty of a person? Though Paulson may be rich enough, he will have to 'live' within the financial circle even after he is 'retired' from the Government. He has been working with these same people for many many years. He has to work with them in the future. e.g part of Board of Directors of one of the financial corps.
There is too much money to throw around this time (mother of all bail outs as per a senior republican). Not easy to remain 'honest' and committed only to the 'common' citizens of the USA…
I am Hanky. I am the CEO and I do not care about all these poor tawpayers who have to give me money (power to tax) to do whatever I want. I want all your money, stupid common man. I am the CEO of this country, you are privileged to have me here. Do what I say.
I can't support the transfer of nearly one trillion dollars to unlimited control through one branch of government. That is equal to yearly discretionary budget of the united states. The entire yearly budget, everything other than SS, medicare, interest, and unemployment benefits.
Technically, it wouldn't be a political dictatorship, but with that much economic power. Literally twice the whole defense budget in single human hands is too much.
Now, the previous commenter is right. If we brought in Warren Buffet, it would be different. That's true.
Regardless of the external merits. It's that we don't believe Paulson has the best interest of the country at heart or the conservative (non-political meaning) financial acumen of a Warren Buffet.
700 Billion of control would be like electing a shadow president.
Hank Paulson turned $700 Million in Goldman stock into US Treasury Securities when he became Treasury Secretary … and paid NO TAXES, thanks to a little know perk in the tax laws. Perk or no perk … he screwed the US Taxpayer. Enough is Enough. You can't allow this guy to do it again. No – don't give him squat. Let the banks fail.
So let me get this straight: subprime homeowners knew what they were getting into and should be punished/held responsible for irresponsible financial decisions (and for believing their mortgage broker when he/she told them they could refinance later when the rate jumped) with bankruptcy, homelessness, and whatever else because screw them, but the CEOs of financial institutions and investors…what? Don't know much about financial matters? Didn't understand the risks they were taking?
I mean if clawbacks would be difficult because they've already gone and spent the bonuses they reaped on yet another house, I have a pretty simple solution: take their house away.
Guarantee all deposit accounts ASAP, sunsetted 12/31/10.
OK, scrap the bailout and let markets run their course.
Ditto to all who say this is a phony Goldman inspired rip-off. Cure worse than disease.
Paulson, Cheyney and Bush should abdicate to Obama on November 5.
This makes no sense. Blank check without oversight, without extracting any pain from the guys who shot the financial system to tatters…is insane. Who let this idiot Evan write in the Journal?
Evan, uou pretty much destroyed your own argument by naming heads of street firms that are only motivated by fear and greed, then going on to say that Paulson isn't one of them while at the same time espousing his credentials in that arena.
He's either one of them or he isn't. If he's one of them then it's true he probably knows how they think.
And he probably thinks just like them. Get it?
Was this crisis manufactured by Paulson to give $700B of taxpayer money to Wall Street buddies. Remember WMD pretext to give plush contracts to Halliburton –running the federal deficit to $10.6Trillion.
How does Paulson justify taking over Fannie and Freddie, 2 months after he said they were adequately capitalized?
Can we trust this guy with $700B of tax payer money?
I love how the repub's always blame The dem. congress. They have been there for 2 years Bush has been in for nearly 8. Come on people he went on a spending spree with our money and when Congress started to stop him he pouts like a 2 year old. But to continue to give only one person all the power is irresponsible. He sits there and doesn't have to worry how his bills get paid, we do. Noone should have absolute power. There has to be someone monitoring the happenings to make sure they are for all the people. I hear people complaining about their mortgages. I have to pay mine to. The fact is McCain voted against regulation and that is how it started. Non banks putting out loans that they shouldn't have. They make their money and pass the loan to some other bank to get out of it. There has to be some rules. Cindy and John liqudated their assets out of Freddie and Fannie 6 months ago. Why didn't we get a heads up on the problems? Seems they can get out of anyhting.
This article was not written by Evan Newmark. I know him to be an ignorant but harmless hack. This article is the work of someone of far less intelligence.
Someone needs to smack that smug look off your stupid face.
Evan, you are right. watching the market react last week and this week, first to the inevitable crises, then to Paulson's decisive actions, he is clearly worthy of this role. he had the experience and insights to come up with solutions, unlike the scrambling congress and presidential candidates. and $700B is cheaper than the total meltdown which we avoided thanks really to him.
Dear Senator Schumer,
Hank Paulson's TARP plan is a disaster, just like all of the other vehicles he and Bernanke have formed. Please do not throw away good money after bad. The only cures for insolvency, recklessness, and excessive leverage are accountability, write-downs, and bankruptcy. There is no meaningful way to price toxic mortgage instruments that no one other than Paulson wants to buy. If the securities are priced realistically, the banks will need to record write-downs that render them insolvent. The only way that the TARP will rescue damaged banks is if it overpays and squanders taxpayer money. Taking equity in troubled banks makes more sense than buying securities from them, but this mode of subsidy is also subject to abuse and must be closely monitored by elected officials and courts (however inconvenient that might be for Paulson). Paulson and Bernanke have exercised their powers in far too capricious a manner to be given carte blanche to decided which firms live, which firms die, and which are enriched at the expense of the public. They have never articulated the criteria that led them to rescue some firms and allow others to fail. We may be in dire straits, and it is possible that doing something would be better than doing nothing, but Paulson's plan wholly fails to address the real problems. DO NOT BACK PAULSON'S TARP PLAN. This issue is sufficiently important to me that I will help fund and raise money for primary challenges to any New York politician who helps Paulson to perpetrate this fiscal atrocity.
Sincerely yours,
This is the biggest con of the century
Credit Default Swaps…BOA has tremendous exposure (since Swamps are unregulated, we'll not know until BOA is on the brink than we go to TBTF (To Big To Fail) program. The Wall Street financial types that engineered and participated in this financial mess have money to last 2 life times if not more. Few in the position of trading CDOs, SIVs, CMOs and Swaps earn less than a million per year and most earn much much more.
Ladies and Gentlemen, a NEW EARTH is quickly coming and this is the birth process. Washington is the next area to transform and purge the way things have been done. This bailout will be Washington's undoing.
Reformers unite – our time has come.
"Paulson gets that. He knows that money and fear are the only two things that motivate these CEOs. And that he will have to bribe and bully them into accepting any sensible bailout."
So need to persuade Wall Street to accept our taxpayer money. We great unwashed are so unworthy that we need the Paulson to beseech these might Wall St princes to accept our filthy lucre.
Listen to the crybabies!
If Paulson gets the black check he's looking for, it will be the culmination of the biggest scam since the invention of money.
Privatize the profit and socialize the losses. A pitch-perfect end to the Bush era.
I'm going to work for min wage…
I would also like to add that this is nothing new. Ever since the Keynsianism thoery came out the government looks for new ways to have defecit spending. They think that since nobody is spending money during a downturn that the tax payers should be taxed higher…heck they are smart and saving their money…so lets tax them. STRAIGHT MARXISM! I THINK I SPELLED THAT WRONG? ANYWAY…THIS IS A FREE CAPITALIST SOCIETY…NOT COMMUNIST. GO TO CHINA YOU BASTARD!
Authoritarian capitalism works in China doesn't it? Why not here? Isn't greed the only emotion worth experiencing? Wall Street uber alles!
Go to Soviet union commie….
Tonight before I go to bed I'm going to get down on my knees and thank God that men like Paulson and Bernanke — and not the economically illiterate know nothings witlessly blogging away here — are the ones in charge of trying to steer us out of this mess. Most of you apparently don't understand that the Paulson plan does not contemplate "giving" anything to the banks. It contemplates only lending to them, or purchasing assets from them at a discount — and possibly even selling those assets in a calmer market at a profit. You also seem clueless about how the American economy works, and that your own jobs, savings, and homes are as threatened by a collapse of the financial system as anybody else's who works on Wall Street. You imagine there's a way to hermetically seal off an implosion of Wall Street from the rest of the economy, and that it's more important to punish the architects of the current disaster than to rescue the rest of us — including most of you. You shriek that shareholders and bonholders should just be allowed to go down the drain, even though almost all of them had no more to do with making the mess than you did. Anatole France, in his novel "Thais", observed that "ignorance and superstition will always be stronger than science and reason". I read this blog and I understand completely what he meant.
Hey Thomas! Look up the word "irony" in the dictionary.
" Such language could have been drafted by any Third World caudillo. But it wasn't. It was drafted by U.S. Treasury lawyers at the behest of the Secretary of the Treasury."
So that's how liberty dies.
What psychotropic substance did you ingest before you sat down at the keyboard and typed this load of crap? Trite though it may be, the following phase sums it up: the foxes are running the hen house. The investment banks and hedge funds have gotten everything they have wanted the last 30 years thru deregulation and have looted our economy, de-industrialized the country. The inevitable happens – the int'l monetary system collapses – and the intellectual appologists for these pirates come out of the woodwork with convoluted and illogical reasoning to advocate for further looting as the way to make up for the previous looting. At this point, even hard right-wing GOP congressmen are calling this a terrible idea. At least they are considering the good of the country above the good of the financial oligarchy.
We don't need another Czar. He wants to bail out the financial institutions, banks and corporations around the world not just in the U.S. Than means the taxpayer will have to fund the bad debt of the world. This is unconstitutional as it violates the checks and balances between the three branches. No judicial or Federal oversight. What? Unlimited power with absolutely no control. Sounds like another Wall Street gimmick. Ops, I forgot Sec. Paulson is Wall Street.
No Bailout of Wall Street unless you bailout Main Street. you don't give money to those facing foreclosure but modify the mortgage contracts.
Wall Street got us in this mess with their insistence with the deregulation of the banking, commodity,financial and hedge fund markets and wanted a total laissez-faire approach by government regulators. Then, let the markets dictate the price instead of whining and begging for the taxpayer to pay off their mistakes. ll.
I say let Wall Street go bankrupt. That's the way the free enterprise system works instead of nationalizing the companies into a socialists market.
Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
I say investigate Wall Street for violating Federal financial, banking & SEC regulations, fraud, deceptive practices etc. and through the bums in jail.
I can't wait for all those class action lawsuits to begin.
"And why he will fight the Democrats' efforts for the government to take equity in any bank that participates in the plan. It isn't ideological. It's practical. These measures cut down on Paulson's flexibility. And a broker needs flexibility to cut a deal that both sides can live with. "
If this is indeed "financial Armageddon" we are facing, why would financial CEOs or boards even CONSIDER balking? After all, as Paulson pointed out to congress, the alternative is financial Armageddon!!
The only reason for a financial company to balk at the taxpayer taking an equity stake is if we weren't really facing financial Armageddon.
So are we in trouble or not? Paulson seemed to scare the pants off congressional leaders, couldn't he present the facts and do the same with the financial companies?
And if so, how could they even THINK of balking?
Again, we are facing financial Armageddon (Henry Paulson's argument), so requiring an equity stake for taxpayers (who are fronting $700,000,000,000!) should be an easy sell…right?
There is only ONE person who I would trust to manage the country through this and that is Paul Volker.
Now, Sec. Paulson wants to bailout the financial, banking and all other institutions around the world at taxpayer's expense without any judicial or Federal oversight. We have just created a Czar in this country. This is unconstitutional as it violates the establishment of checks and balances between the 3 branches of government! So the American taxpayer is to assume the debt of the whole world even though they don't pay taxes in this country!
The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
Now, Sec. Paulson wants to bailout the financial, banking and all other institutions around the world at taxpayer's expense without any judicial or Federal oversight. We have just created a Czar in this country. This is unconstitutional as it violates the establishment of checks and balances between the 3 branches of government! So the American taxpayer is to assume the debt of the whole world even though they don't pay taxes in this country!
The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
But wait a minute…. I'd think that any column called "Mean Street" would look down sardonically on anyone who went to the government for help, rather than being self-reliant. OK, so let's hear some sardonic comments on those manipulative parasites who now want to be bailed out after they caused the problem themselves with their own greed! Do they think that just because they have plenty of financial power then it's perfectly acceptable for them to act on irrational fears and/or play the victim role?
Stop the Wall Street Bailout and write or phone your representative
Guess who will make more money with the bail out? Wall Street. Bond investors like Pimco and BlackRock will be vying for the lucrative contracts to manage these toxis assets. Other investments banks will also be getting the fees out of this transaction. If this bailout should go on, the CEOs salaries should definitely be capped and minimal fees should be paid out to the bankers and lawyers of these transactions.
Foreign Banks Hope Bailout Will Be Global
PARIS — The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.
wow – it's amazing how many people can rant about this topic but have absolutely no clue what has gone on. It's also amazing how many people are SO confident in the fact that this plan is a bad thing but probably never heard of the RTC. Sheesh … a blog of idiots.
First he was elected as Chancellor (Jan. 1933)
Next it was the Reichstag Fire (Feb. 1933)
Next the first Concentration Camp opened at Oranienburg outside Berlin. (Mar. 12, 1933)
Wasting no time, the Enabling Act give him dictatorial power. (Mar. 27, 1933)
Next the boycott of Jewish owned shops. (Apr. 1933)
Next a book burning (May 1933)
Dachau concentration camp opens. (June 1933)
Nazi party declared only party in Germany. (July 1933)
Germany quits the League of Nations. (Oct. 1933)
It doesn't take long to lose ALL your freedoms.
Speak out loudly and NOW!
There is no doubt that there is a global contagion associated with this mess. No matter who is at fault a mechanism to stay the spread of the disease is necessary. A disease that will spread from Wall Street to Main Street (watch this and next quarter earnings) and to the rest of the globe. I have a plan proposal that may stem the tide and may be fair to us all as taxpayers:
Congress should do the following:
1. allocate the funds to Treasury with deal review and documentation not oversight rights by congressional comittee. No right of interference in the process of allocating the money. Assign more than just Paulson to disburse the funds: Bipartisan group of three: Paulson (a republican), One Democrat(Bob Rubin – Democrat), Head of Federal Reserve
2. Assure the market that any deal done by the Treasury is irrevocable (read as: Accept the language Paulson is asking for)
3. Keep it clean and easy to administer – Do not attach any additional requirements such as support for the Mortgage payer
4. Assign an arbitrary 10 cents on the dollar (or similarly low number ala morgan for Bear Stearns deal) to all institutions interested in offloading the ENTIRE pool of "toxic instruments" (no cherry picking allowed) which supposedly are illiquid. Mr. Dimon said of his low ball purchase/valuation of Bear Stearns:" It is one thing to buy a house, its another to buy a house on fire"
5. Tell Banks, take it or leave it. Any Bank which chooses to go bankrupt despite presence of clear and present buyer (happens to be the US government's Treasury) for items on their balance sheet that are illiquid should be allowed to go bankrupt.
6. All executives of Banks that are willing to allow their company's to go bankrupt and their firms' executives should be put on notice that they will face immediate investigation for criminal negligence and a slew of other charges associated with harming not only their firm but others in the economy and the nation (deprived indifference comes to mind). They should be able to explain why they let their firm go bankrupt rather than take the deal from the Treasury.
Mr. Paulson should be given the authority he desires. However, the homeowner faces a similar crisis to the Wall Street firms, he or she is also going bankrupt. The relief to Wall Street must be available to him or her as well. The physical asset on main street is defenitely worth 50 to 60 cents on the loan value and the bailout will most likely pickup the loans at 20-30 cents. The market froze because the buyers at this price level stopped. The govt. will make a pretty penny by re-nogotiating these loans at purchase price at market interest rates. The social advantage will be the preservation of our neighborhoods, increase in total home-ownership and a lesson to investor to be cautious in investment and not allow a series of middlemen to inflate the system by false valuations. To many people were busy taking transaction fees without tracking the investment quality. Investors shall learn and the bailout will act like a clever foreclosure investor with benevolence to ensure exceptional profit while ensuring the integrity of our American neighborhoods and increase overall home-ownership.
"Paulson gets that. He knows that money and fear are the only two things that motivate these CEOs. And that he will have to bribe and bully them into accepting any sensible bailout."
Let me get this straight? What are the CEOs "afraid" of. Taking our $700 billion? Evan Newmark is an idiot.
The Bailout, whether on Paulson's terms or Chris Dodd's, amounts to Welfare for Wallstreet, plain and simple. The melt-down is going to happen anyway. All this does is buy Paulson's cronies some time to liquidate enough of their holdings to allow them to quietly retire to the Caribbean while the US suffers through a second Great Depression.
Ha, ha! That was the funniest thing I read all day. Good one. Better yet, give me the $700 billion and I'll fix everything real good all right. Ha!
In the last week of June, 2007 a liitle hedgefund went belly up at a large Investment House headquartered in New York. No one really noticed or cared to ask WHY? Look how far we have come since then. STOP THIS MADDNESS, AND LEARN TO LIVE WITHIN YOUR MEANS.
If institutions are not willing to accept limits on executive compensation in exhange for participation in this bailout, then why should we care? This legislation, after all, is meant to protect MAIN STREET, not Wall Street (well, at least that's how they're selling it). If an institution is unwilling to accept this limitation, then they are destined for failure. Why should we care?
"If our luck holds, Hank Paulson will get the extraordinary authority he seeks." Bull—-! The US government (taxpayers) has NO business buying toxic crap it has NO idea the present value of. Instead, every government regulator should MANDATE that ALL financial institutions they oversee IMMEDIATELY identify EVERY last piece of toxic crap they hold on and off their balance sheets. These should be put into one HUGE pool. Then the government should conduct a worldwide auction of ALL this crap. Believe me, EVERY piece of crap WILL be bought at the price distressed debt investors will be willing to pay. Then the government can distribute the proceeds of this auction to the beneficiary institutions, net of an appropriate commission to the government for its auctioneer services. Then the institutions can take the hit to their balance sheets, survive or die, and then we ALL can get on with things. Oh, a caveat … if it is found that ANY institution held back any toxic crap from the auction, every single officer & board member of same shall be ensconced in Guantanamo without charges filed (as financial terrorist combatants) until they rot. My & my wife's IRAs and 401Ks have already taken enough hits due to these pricks' greed … I have NO interest in giving 1 damn cent more of MY money. Double "birdie" Paulson, Bernanke, Congress, and the rest of the Federal brain-dead stooges if they do.
To "avid reader": spare me. It's people like you that really irk me. Please, tell me about the RTC.
If you know anything, then you know we LOST money on the RTC. You also probably know that this situation is NOTHING like the RTC. In RTC times, we had no choice but to accept the poor performing assets of the failed banks. We didn't have to "bid" for the assets. Here, we do have a choice and that's exactly what's being debated here. I'm sorry if it's making you uneasy. This administration is trying to cram this legislation down our throats, even though the problem has been building for over 2 years. Last, if you know anything about the RTC, you'd know that McCain was formally admonished for his poor judgment in the events leading up to the crisis.
Let me get this straight. You say "they have to be bullied" and conned with our $700 billion in tax money or else the CEOs that got us into this mess will what? WHAT? Not take the bailout? SO WHAT! GOOD! LET THEM EAT CAKE. Don't give me this BS. They do not hold the cards now. WE DO.
Why is it acceptable for the Treasury to assume equity in a failing Investment Bank but not an individual mortgage? The Treasury could reduce the amount of the principal by assuming a first lien position at no interest, reducing the mortgage payment and allow a mortgage to be revalued and underwritten accordingly. Secretary Paulson has stated that the credit market is seizing due to the illiquid securities, this would create a realistic revenue stream for the securities which could then be valued in the open market as intended. It may also prevent a more severe erosion in property values and ideally reduce the amount of "toxic" assets we the taxpayers are purchasing.
evan well written. hey people this country needs this thing right now and questions can be asked later. this is extremley importand. hasnt enough wealth been lost. of something isnt done immediately there will be nothing left for anyone.
The Bailout bill will by the outstanding mortgages at 20-30 cents of face value. The market stopped because foreclosure investors weren't picking up at this price. The govt. then should re-nogotiate with the homeowners at current interest rates providing a handsome profit for tax funded money, return of a real corelation between the mortgage and property. Most homeowners would be able to afford these realistically priced mortgages, disruptions on main street would be minimum, and homeownership will have increased. The investment entrepreneur will have suffered the outcome of risk taking without consideration of the real value of their investment. For too long the transaction fees had become the criteria for creating these loans allowing falsification of valuations in every step of the way.
I hope this is satire, dude. If not, you deserve to live in a Banana Republic where you ideas will find more support.
This article has me irate! We, the taxpayers deserve more than just "shut up and give them the money." This administration has shown itself incompetent. I can't believe you have the gall to suggest we shouldn't limit corporate executive pay! And the reasoning is absurd…that they will have to be bullied into accepting $700B dollars. You look like a typical wall street crony with your crooked shifty smile. You probably are going to profit handsomely from this.
Check out the polls if you think its just Dems who are against this. Rasmussen shows only 28% of Americans support this, and they blame Republicans more than Dems by a 2:1 ratio.
f-this,im movin to bangkok. expat time!! can i still get 30 baht to the dollar????
This is unbelievable! We should not ask for limits on executive comp and equity stakes in the I-Banks because it would threaten the bailout. You have to be kidding me! Beggars cannot be choosers. It is bad enough that we are bailing these guys out. They can either take our terms or go under. Give me a break!
GWB was not happy that he tried his best to screw up the economy for last eight years still the economy was some how holding up!
So he may have ordered his buddy Paulson to finish the game before peacefully leaving the office!
Other than recapitalizing the banks OWN balance sheet there is no guaranty of anything. What are banks going to do with the money? Make more worthless loans to people who will not be able pay them back. The financial condition of the average borrower is condition critical. Those who can afford a loan do not want one. The banks are SOL which is exactly were they belong for this "crisis" they caused. Personally, I do not consider this a crisis and prefer the banks who made the bad loans to fail. New ones will emerge that understand down payment, credit score, and repayment capacity. All items that these failures forgot about.
Why don't the govt force the banks to write down the toxic assets (created by them in the first place). This process would bankrupt the banks. Then the govt use the $700 B to buy up all the failed banks, and restructure them. In this case, taxpayers get all the upside and control the management compensation.
Hillary, Hillary, where are you ? Say something. We miss you.
How The Grinch Almost Killed Wall Street
(How the Grinch Stole Christmas revised by
William Banzai7)
Every Banker down on Wall Street Liked CDOS a lot…
But the Grinch,Who lived just north in Greenwich, Did NOT!
The Grinch hated those Street jerks for a whole list of reasons!
Now, that is why we are having this exciting fall season.
It could be his trader head was screwed on just right.
It could be, perhaps, that his white shoes were a little too tight.
But I think that the most likely reason of all,
May have been that his NAV was 12 sizes too small.
Whatever the reason, His smarts or his shoes,
He stood there last week, hating all Wall Street's Whose Whos,
Staring down at his trades with a sour, Grinchy frown,
Detesting those warm lighted screens in Wall Street town.
For he knew every Captain down in Wall Street beneath,
Was busy now, trying to sail through the great Subprime reef.
"And they're firing their traders" he snarled with a sneer,
"In three months its Christmas! It's practically here!"
Then he growled, with his Grinch fingers nervously drumming,
"I MUST find some way to give those investment bankers a drubbing!"
For Tomorrow, he knew, all the Whose Who of Bankers,
Would wake bright and early. And rush to save all their paper earnings!
And then! Oh, the noise! Oh, the Noise!
Noise! Noise! Noise!
That's one thing he hated! The NOISE!
Then the Whose Whos, young and old, would all fly Far East.
And they'd try to talk Korea and China into feasting on trading book yeast!
And they'd feast! And they'd FEAST!
They would feast on champagne and rare banker roast beast.
Which was something the Grinch couldn't stand in the least!
And THEN They'd do something He liked least of all!
Every Who down in Wall Street, the Bulls and the Bears,
Would stand close together, with opening bells ringing.
They'd stand hand-in-hand. And the Whos would start singing!
They'd sing! And they'd sing! And they'd SING!
And the more the Grinch thought of this Singing,
The more the Grinch thought, "I must stop this whole thing!"
"Why, for year after year I've put up with it now!"
"I MUST stop a Wall Street bailout from coming! But HOW?"
Then he got an idea! An awful idea!
"I know just what to do!" The Grinch laughed in his throat.
And he made a some quick calls to spread rumours of unkown CDS stew.
And he chuckled, and clucked, "What a great short seller trick!"
"With this phone and this screen, I'll batter those Wall Street Dicks!"
"PoohPooh to the Whose Whos!" he was grinchishly humming.
"They're finding out now that no White Knight is coming!"
"They're just waking up! I know just what they'll do!"
"Their mouths will hang open a minute or two,
Then the Whos down in Wall Street will all cry BooHoo!"
"That's a noise," grinned the Grinch, "That I simply MUST hear!"
So he paused. And the Grinch put his hand to his ear.
And he did hear noises over the trading screen glow.
It started low. Then it started to grow.
But the sound wasn't sad! Why, this sound sounded merry!
It couldn't be so! But it WAS merry! VERY!
He stared down at Bloomberg and Reuters! The Grinch popped his eyes!
Then he shook! What he saw was a shocking surprise!
Every banker down in Wall Street, the longs and the shorts,
Was singing! Without any White Knight at all!
He HADN'T seen a Big Wall Street bailout coming! IT CAME!
Somehow or other, it came!
And the Grinch, stood puzzling and puzzling: "How could it be so?"
"It came with out tickers! It came without a tab!"
"It came as Federal largesse in boxes and bags!"
And he puzzled three hours, till his puzzler was sore.
Then the Grinch thought of something he hadn't before!
"Maybe a Bailout," he thought, "is not just for financial whores"
"Maybe Fed bailout…perhaps…means a little bit more!"
And what happened then? Well…on Greenwich Main Street they say,
That the Grinch's taxes grew 12 sizes that day!
And the minute his wallet didn't feel quite so tight,
He whizzed with his Lexus through the Bronx morning light,
And he met those Wall Street boys for a Smith & Wolensky feast!
And he, HE HIMSELF! The Grinch carved the beef!
Money flow in this country has come to an absolute standstill. I disagree with the author about giving Paulson a blank check, but I do think the bailout needs to happen. Most businesses in this country operate with the basic notion that money will flow when needed for good business decisions. That isn't happening right now. Everyone is living in fear. And banks are sitting on their hands. If the bailout doesn't happen, a lot more financial institutions will go under, and money lending will slow even more, if that's possible. And that would devastate the economy. Forget Wall St…we're talking Main Street USA companies going under. And if that happens, we're all screwed. Give Paulson the money for the bailout, with A LOT of checks and balances. And get it done this week.
And I suppose it will be our economy, writhing ecstatically in trillions of dollars, that will utter a sardonic "sure, I was cured."
Lunatics have taken over the asylum.
Its all over, S&P to hit 500.
The "no review by anyone, so there" clause is unconstitutional anyway, just a stall tactic, adding an additional layer of up to SCOTUS and back to stall for time.
Just put in a "don't challenge this for a year" clause, and then everyone will be happy.
"Thank you sir! May I have another"
Animal House
there is no ideology at work here, capitalism, free markets, socialism etc.. is all nonsense.
what they are doing is simply transfering public money into private hands very efficiently and with no recourse : 1 trillion dollars in a week, in front of everybody, with everone's concent in the most "democratic" manner possible.
i don't what they are "saving" in this whole sham. wall street serves no purpose whatsoever i have been seeing it everyday for the past 5 years in my job.
Isn't Paulson today testified in front congress just like Cheney painted a picture for America to go war with Iraq? Wake up congress and all investors. The link for Cheney lied in front of congress: http://www.alternet.org/waroniraq/87630/senate_intelligence_committee:_bush_and_cheney_misled_us_on_iraq/
THE BAIL OUT SURGE– Final Act of the Tragic Bush Comedy
The Financial Katrina that has hit Wall Street is a fitting metaphor for
8 tiresome years of incompetence from the Bush White House.
Lets take a look:
White House: During the months leading up to 9/11, there were numerous red flags
that Al Qaeda was planning something big. These were blatantly ignored.
Wall Street: During the years leading up to this financial crisis, there were numerous red flags that
Wall Street was dangerously over leveraging the real estate market. These were
ridiculed and blatantly ignored.
White House: After Katrina hit New Orleans, the administration claimed everything was
hunky dory, under the adept leadership of a political hack called Brownie.
Wall Street: After the Subprime market began to implode last year, the administration continuously
claimed that our economy is fundamentally sound. The financial markets were
being competently protected by the SEC and its disastrous politically appointed Chairman Cox.
White House: After 9/11 the Bush Administration laid the blame on Saddam Hussein. A despicable
guy, but not the perpetrator.
Wall Street: In the Subprime Crisis, the administration is laying the blame off on short sellers. You may not
like them, but they are not the perpetrators.
White House: After 9/11, the administration slacked on chasing the real perpetrator, Bin Laden.
Wall Street: In the Subprime Crisis, the real perpetrators, reckless Wall Street executives, are not being brought to
Weapons of Mass Destruction
Financial Weapons of Mass Destruction
Improvised explosive devices
Synthetic CDO's
Opaque Whitehouse
Opaque financial institutions
Failed regimes
Failed models
Following years of mismanagement of the Iraq War, the administration used scare tactics to
force Congress to go along with the military surge.
Following years of regulatory inaction and months of failure to stem the subprime crisis, the administration is using scare tactics to force Congress to go along with
the subprime bailout surge.
After the surge, there is no final solution in sight.
There is no final solution for the subprime bailout surge.
The Military Industrial Complex thrived under Bush.
The Consumer Finance Industrial Complex has thrived under Bush and will thrive once again. Who do you think is going to manage
all the bailout assets after they are purged from Wall Street's books. Wall Street of course!
Wall Street: Moral hazard.
White House: Moron Hazard
Wall Street: Got Drunk
White House: Former drunk
Billions and billions of dollars to be spent all around.
The same guy gets screwed in the end, Joe tax payer.
Mr. Bluster (Sen. Ted Stevens of Alaska)will surely come back to D.C. and lead us out of this wilderness as soon as his trial is settled. Please stock up on canned goods and guns (but no derivitive trading on beets or ak47s, etc. will be allowed). Please for the sake of our children, hang on!, until Mr. Bluster alights from the northern sky and saves us and the world as we knew it.
another one in the series of worst writing in financial blogs. what a shame!
I don't think the question should be more or less regulation, but rather right or wrong regulation. We had regulation, which the Democrats used to force Fannie Freddie and others to make loans to people who couldn't afford them. Wall Street and Main Street deserve a big dose of financial reality that hopefully will change irresponsible behavior. As for Congress, there should an Enron-like investigation and CONGRESSMEN and SENATORS should be held accountable for their manipulation, greed, ineptitude and partisan selfishness.
Why on earth does Paulsen need to negotiate with anyone?
Yeah, I'm sure it will take a lot of arm twisting to get banks to take $700B in free money. Paulsen better be a great salesman to pull that off.
Give me a break.
In reply to "Dear Main Street"
Dear Wall Street and Washington, We Don't Need Your Explanation.
By Douglas Young
Dear Whoever,
No we are not trying to make sense of this whole thing, and no it is NOT over our heads. The problem is that it is over YOUR heads, and not very complicated. Say "greedy overpaid jerks" a dozen times and see if it doesn't tick you off. Wait, don't get frazzled, Stick with me though Wall Street, and I'll explain to you what is going on here on Main Street, since you no longer come down here to conduct your business, you leave Park Avenue, go directly to the airport, jump on your leer jet and fly over to China or Mexico to save a buck!
What is going on here is just plain common sense. Seems that in order to have common sense, you must make under $100,000 a year, once you cross that threshold, you must relinquish the common sense. This "GREAT BAILOUT" is just a new way to fork over Main Streets money to the greedy financial institutions and politicians who really hold the bag for this mess. Unfortunately, since Main Street has no more money, they are taking the money from the children playing on Main Street so that they may pay 10% higher taxes in the future, for a mess they are not responsible for.
Wall Street, we know what is going on, Washington, you say that this will open up the credit markets so that banks will have money to lend businesses and people so that businesses can support their day to day operations, and people can have mortgages and auto loans. Washington, MAIN STREET IS BROKE! WALL STREET HAS GOTTEN EVERYTHING THAT MAIN STREET HAS EVER HAD. Let me explain….
Over the last 20 years, the prices of everything needed for us Main Streeters to survive has exploded, especially true in the last 5 years. The average wages have been all but stagnant for the last 20 years thanks to global free trade, and don't hand me a line about your polls and statistics, a 16 year old just starting out is going to make the same $6.00 an hour that I made when I just started out 20 years ago. Raises average about 3% annually, and inflation is more like 16% annually once you factor in the two elements that all of your "financial annalists" throw out, food and fuel. It may be a small percentage of YOUR budget, and YOU can afford to just toss these figures, but it's a substantial part of Main Streets budget.
Here is the common sense, so pay close attention: when food and fuel are 20% of your budget and these prices double or more as they have over the last 5 years, it now becomes 40% of your budget, so if you make $500.00 a week (another thing Wall Street doesn't understand is the difference between gross income and take home pay) and use to have $100.00 a week extra to buy things with, you no longer have that $100.00. Spread over 100 million people, that is 10 billion dollars a week! In case you haven't realized, (you may want to confirm this with your chauffer) You can put that $100.00 In your gas tank in one fill-up. Insurance rates keep going up, taxes keep going up, costs of services keep going up, (have you called a plumber lately? Or inquired about college courses?) and then there is the financial sector, more fees and charges than bombs dropped in Iraq! Why in Gods name should I have to pay a $10.00 fee to pay my mortgage online????? I am eliminating the paperwork, travel, and just about any barrier to them getting my payment. It is getting wired directly to their account! But they will find a way to rip off Main Street just a little more. Credit card companies will double your balance in a few short months if you fall behind with outrageous fees and bogus charges, then wonder why you default. If someone is having a hard time making payments, punishing them with ridiculous fees and higher payments doesn't make sense! It won't work! You can't get blood out of a stone!
Granted, Main Street bears some responsibility for this mess in actually believing Wall Street when you told us that we could simply "re-finance" our balloon rate mortgages and that we could afford the payments. We were told that we deserve all the finer things in life, and that we should spend money. So, we did what you "know it alls" said to do! Now you blame us? You didn't tell us that you would drag our credit scores down so that no one would re-finance us with such a debt to income ratio that you created, or if we are late on a payment on a loan at 11% interest, you would not refinance us for a loan at 6% interest which you really know we could afford. Its all about ripping Main Street off!
Washington, this "GREAT BAILOUT" is suppose to free up the credit markets, so the banks will lend money. WAIT, isn't that what got us into this mess in the first place? More bad loans, more defaults, just what we need. My 6 year old son understands that the whole principal of this is wrong. Why don't you? It's just a bailout of the rich. Are the banks going to reduce the interest rates of the high interest mortgages out there to a reasonable rate? No. Are the banks going to lend money to Main Street? No. Unless you are in that above $100,000 a year club, you are not going to see any benefit from this bailout. You think Main Street businesses are going to just run to the banks to take out loans? NO, they do not have any customers! Do you think Main Street residents are going to run right out and buy brand new cars, Tvs, and boats? NO, they can't afford the debt the already have. So, 1 trillion dollars that my children are going to have to pay for just to keep the caviar flowing.
As far as crises is concerned, it wasn't your crisis when hard working families were forced to leave Main Street and go to subsidized housing, but now that you feel the pinch it's our problem. Yes, Main Street makes up 70% of our economy, and all I need to do is look out my window to tell you that your future doesn't look bright. I don't need all of your over-paid, over-valued financial annalists who are wrong more than the weather man to tell me that until you fix Main Street, Wall Street is going to suffer. It's common sense people, Main Street has been raped and pillaged for so long that there is nothing left to take. You can take our homes and let them rot into the ground and loose big time, or work with us to solve our problems. Bankers, listen up. Here is a common sense moment, if a homeowner is making an effort, rewrite their loan so that they can afford it. You can still make your profit, lower interest rates for mortgage holders, go from 30 to 40 year mortgages, loose all the ridiculous fees. Otherwise, this reckless course is destroying our nation, and unless you are completely stupid, it must be what you want.
Main Street
By the way, since when was this country divided into Wall Street and Main Street? That really shows the disconnect between Wall Street and Washington and Main Street. The pillaging needs to stop now!
You Wrote,
Dear Main Street: A Letter of Explanation From Wall Street
by Deal Journal
Dear Main Street,
Are you trying to make sense of what's happening here on Wall Street?
Don't worry — you aren't alone. A lot of people even here are trying to figure that out. It isn't that complicated, but Wall Street is so full of mumbo jumbo that it's easy to get confused — or bored.
Say "collateralized mortgage obligation" a dozen times and see if you can stay awake.
Stick with me, though, Main Street and I'll explain what's going on here in New York.
Believe it or not, you've seen this movie before. And I don't mean, "It's A Wonderful Life," though that movie isn't far from the mark.
What's going on is a classic industry shakeout — not all that different from the shake-out of the American steel or auto industries over the past half century. Just in a much shorter time frame.
In just nine months, we have gone from five big, independent Wall Street brokers to only two — Morgan Stanley and Goldman Sachs.
The government took over Fannie Mae and Freddie Mac, the country's largest mortgage companies, a bit more than a week ago.
And just Tuesday, we nationalized AIG, the world's largest insurer.
Of course, consolidation inevitably produces winners and losers. Lehman Brothers, the fourth largest US broker, is a loser. It went bankrupt two days ago.
Bank of America is a winner. It bought brokerage Merrill Lynch three days ago and is now our nation's largest financial institution.
That's a lot of change in not a lot of time.
And when there's change, there's uncertainty. Today, for example, we still don't know whether Washington Mutual, the largest U.S. savings & loan, will stay independent.
Uncertainty isn't good for any business, as it destroys confidence. It is especially bad for our financial system, because the system runs entirely on confidence. I lend you money confident that you will pay me back. If I don't have confidence in you, I won't lend.
Which is just like Wall Street today. Our nation's financial institutions don't really trust each other. And for good reason.
In all, about $2 trillion dollars of lower quality mortgages are spread about our financial system. Many of these are now in default which threatens the banks that hold them.
And of course the lack of trust spirals. Less lending by banks to each other, less lending to Main Street's companies and less lending to you. In the end, the money's not there for you to get a mortgage or auto loan.
And you account for 70% of the economy. So when the money isn't there, that's bad for everybody. Without credit, you get a crisis — a credit crisis.
Of course, we deserve heaps and heaps of blame. Wall Street took the mortgages, sliced and diced them a hundred ways, sold and traded them. We took a nice cut along the way, blissfully oblivious to the risks.
We do have a remarkable talent for cooking up crazy get-rich schemes. Remember the Internet bubble? That was less than a decade ago.
But Main Street, you're also to blame.
Recall the hundreds of billions in bad mortgages that are now killing Wall Street? That was money lent to you, Main Street, for homes and condos many of you could not afford.
And ironically, it is now your money that will be used to repay those dud mortgages because we on Wall Street are running out of money.
The government takeovers of AIG and Fannie and Freddie? That's your money. J.P. Morgan's buyout of broker Bear Stearns last March was also your money,
You might not like it. We on Wall Street may not like it. And even the politicians in Washington may not like it.
But nobody has a choice — unless you happen to have an odd yearning to live in a barter economy.
So Main Street, our crisis is unfortunately your crisis. We made the mess together and now we pay for it together.
The mergers, government takeovers and bankruptcies that will continue to sweep our financial system are a good sign. It means that we are fixing ourselves. Albeit at gunpoint.
Isn't it strange the way our free market works? The government saves Wall Street — and you Main Street foot the bill.
My advice? Save this letter and show it next time we all embark on another stupid misadventure.
Wall Street
Copyrighted, Dow Jones & Company, Inc. All rights reserved.
I can only assume that this blog is a complete joke. No other explanation.
If the government gives you a loan at high interest for company stock, then our country is moving towards communism. They will be getting that stock for nothing. Look at AIG. The gov't was given a great interest on a solvent company which had cash flow problems. They didn't find that to be enough, so they stole part of the company. Legal theft is still theft. And the government forcing private companies to give them part of their company is communism.
Evan, if Paulson and other iBankers knew Americans bought homes they couldn't afford, why then would you create derivative upon derivative products to sell and trade amongst yourselves, other than to make profits while the game lasts…
Realize the commenting on this site is about over, but as a thinking person – in distinction with 99% of the posters who appear to be Utter Idiots, or worse, outsider types, like liberal Demoncrat Oblahma supporters, who don't have any money anyway, I have to say Evan is right on and the only worthwhile posters were michael fiori and Nik B. – it makes no sense to cut off your nose to spite your face, as most of these senseless, angry writers seem to want to do. We do the Paulson bailout as is or we ALL end up selling apples on the corner – although for some of these fools I imagine that would not be too much of a fall. But the country has to be managed for the benefit of the common citizen – and if we don't do this the citizen is screwed.
By the way, Doug Young at 9:35 sound like a typical communist or Oblahma supporter – not only nutjob leftist but not really substantively replying to the points at issue.
The Congress that is now questioning Paulson is the same congress (years of experience) that caused the problem.
Given a chance, we will all benefit from Paulson's plan; including those in foreclosure status. While mortgage brokers broke the bank, and greed buyers of these climbing rate-change mortgages are all to blame, most borrowers knew they were skidding on thin ice.
I think this is a good step to stop the bleeding on Wall Street. The only problem is the consumer. They are getting hammered. Once they bail out Wall Street they need to point there guns on the consumer. What about the folks with ARMs coming due? What about the home equity declines? Check this out, makes you think.
Evan -
Usually I think you are an arrogant a__ but lately you are making sense. You are on the money with your last three blogs. If Paulson doen't get the money and power to fix this problem then the whole system goes down the tubes and we will all be at soup lines. Bravo Evan. I like you trust Paulson more than I do our congress.
Cheap money led to a huge pricing bubble in the housing market. The investment banks then leveraged the overvalued loans into huge investments feeding sconomic growth. The whole thing was based on bloat. Our economy cannot – CANNOT support the level of growth we've been experiencing.
We need to step back and take our lumps for living beyond our means. Propping up the very institutions will only prolong the inevitable market correction.
I'll be sure to as the government for a bailout of the back taxes i owed. I made some mistakes when I was younger and I have been paying for it. But I think I'll ask my congressman to get that added into this bill. Lets just erase everyones debt!!!
Paulson & Bernanke are applying a tried & true solution when the top of the lending cycle creates frothy financial assets. This time around, that cyclical pattern was made a lot worse by the new mark-to-market accounting rules imposed by regulators. Most of the assets involved will be bought by the Government at fire-sale prices and gradually sold back into the market at higher prices that reflect their true long-term value. That's what solved the savings-and-loan crisis, and taxpayers actually made a profit on the whole deal without seizing the stock of troubled banks.
If we don't do this and do it now, most credit and lending will stop in the US and other developed nations. Everyone will suffer on a scale that is far, far worse than what we're seeing today. To avoid that disaster, we need to buy time to dispose of assets at long-term rather than short-term values. And Paulson is proposing a proven method of doing that.
As to punishing the small number of senior execs who presided over the stupid loans and derivatives, we'll also have to punish the legislators and regulators who screwed up their end, along with all the good citizens who stupidly bought way more house than they could pay for. And if we let all that punishment stand in the way of saving our credit system, then we're the stupid ones.
The bailout will be a bitch, with a seven year itch.
Excuse me but: "but Americans are a lucky people – Last week, we did our best to destroy the financial system but somehow came through it"?? Who is this "WE"? I have not taken on too much debt or a crazy mortgage but my taxes will be used to bail out everyone else as per the plan of this Administration.
You can say what you want about Paulson but he has been caught flat footed when others saw this coming so how is he so smart that we will trust him to solve this. He is part of this lying administration that has conned Congress and the American people so many times with tales of death and destruction if we do not just blindly trust them. So you propose that we do it again, as in doing the same thing over and over and expecting a different outcome? Doesn't that make you crazy by some definitions?
AT LAST Congress is not just rolling over and I say good for them. Personally I do not want $1 of my money going to this and I will not vote for anyone who supports it.
Evan, I agree that if there is anyone around who can do this its Paulson i.e. he has the skills needed BUT — BUT BUT
He does not have the time.
Have you pictured the scenario that Democrats get elected into the White House in November and take office in January … what will happen then? Paulson will very well be gone.
Obama's "change" pitch will pretty much force him to get rid of the "Bush's Guy" and bring someone else in to "clean up the mess".
I am concerned that the new Secretary of the Treasury will not necessarily possess the skills to see off this plan.
After all it will take a lot more than a quarter to clean up these balance sheets. Even if approved, it won't be before a couple of months that we will have a clear plan to move forward.
That's my concern.
So the point of much of this seems to be that Paulson says we do as he says or the system collapes and we all pay anyway. Well that's what HE says but how do we know that is true. So the writer says that after being lied to and bullied for years we should nonetheless still just beleive these guys. So as usual we are told oh don't think about it or look into it just do it or else!! If these guys were really so smart they would have headed this off. I prefer to examine the facts and review the situation than to just trust this guy and hope for the best. There is no cap on this blank check ya know, he says its $700 billion but the war was going to take six weeks and pay for itself.
Its not cutting off your nose to spite your face if you refuse to be blackmailed!!
Evan Newmark you're an A$$-hole-with-hemroids.
There are ways to give the TS (Paulsen) what he needs with out supreme power and exemption/immunity over the entire banking indistry. He's in there to bat for GS and there's no doubt they negotiated (in the Deal Sunday night) that Paulsen be the puppet for which Goldman hides behind while they run the world through the banking industry.
If we're really gonna get with the Stalinist progams then …. line up all these fat-cats on wallst. and all the $cum-buckets in washington on the take (for millions) and shoot them …cause that's waht's coming next isn't? pssshhhh!!! "sign this or else!" – Its should come out of they're asses first.
If anyone think this is a bailout for the financial industry, you couldn't be more wrong. This is a bailout for the American TAXPAYERS! The government isn't giving these companies par value for their bad debt. They're protecting the American taxpayers from the burden of dealing with another great depression and having to rebuild the whole financial market from scratch. I don't know about anyone else, but I've got my retirement riding on this financial market. I'd rather not lose ALL of it because some people think this benefits the companies more than it benefits the people who bought houses with no money down because congress gave FNM and FRE the authority to purchase that debt. If anyone is to blame for this, it's Barney Frank and his cronies in Congress! Stop attaching conditions and let the man fix the problem without giving up both arms and both legs.
Did anybody notice the URL for this entry has the words "shut-up-and-give-paulson-what-he-needs." Deal uses WordPress which creates a permalink based on the first title you give it. My guess is Newmark originally, titled this "Shut Up and Give Paulson what he Needs." but changed it later thinking that would be too much.
He still shows utter disdain for taxpayers though.
I'm a poor, leftist, Canadian and I can say with absolute sincerity that you rightist, rich, Americans have long since shaved yourself bare between the legs – no suit and tie can hide this fact.
So you might as well SHUT UP, grab your ankles and let them finish the rape and pillage of your once fine nation.
It been quite a fall since 1776 hasn't it?
Evan — This is satire, right?
This is just Capitalism eating its Children once again; a bigger feeding this time and that's all. You would think people would have adjusted to the brutality of this system by now, perhaps. Instead, there is panic and fear driven public complicity in its ever more massive crimes. American Style Capitalism with a Good Final Outcome? No BLOODY WAY!
"How does additional aid help anybody?"
Then why even do this bailout?
Here's the lead of a New York Times story on Sept. 11, 2003: "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago."
Bush tried to act. Who stopped him? Congress, especially Democrats with their deep financial and patronage ties to the two government-sponsored enterprises, Fannie and Freddie.
"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Rep. Barney Frank, then ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
It's pretty clear who was on the right side of that debate.
As for presidential contender John McCain, just two years after Bush's plan, McCain also called for badly needed reforms to prevent a crisis like the one we're now in.
"If Congress does not act," McCain said in 2005, "American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."
Sounds like McCain was spot on.
Will the goverment create a agency like the IRS to manage these loans then deny the persons with these loans due process just like the IRS?
There is a way to solve the current insolvency crisis of our taxpayers and the credit institutions that does not involve gifting the bad behavior of either with $700 billion.
Instead of the Federal Government buying bad debt, they should use this as an opportunity to turn it back into solvency. Instead of buying garbage and saddling taxpayers with it, they should do something along the lines of giving home-owning taxpayers the option of taking on the Feds as a 1st position leinholder by having the option of having (arbitrary number) 24 months of their mortgage covered by the government. MAKE IT AN OPTION OF THE HOMEOWNER-NOT THE BANKS. This would give the banks mortgages that suddenly are paying instead of going into foreclosure. It does NOT give the banks sudden additional equity in the home because the Feds would own as much of the mortgage as they paid into it. If the house is sold, they get paid back first. If it is foreclosed anyway in the future, the feds get paid first. The option can be paid in one fell swoop to the banks which improves their short term financial position, as well as giving the taxpaying homeowners a break from crushing debt which is the real crisis, not the banks. The banks having issues is only a symptom of the problem which is the growing insolvency of the average homeowner in our country. It does not absolve ANYONE of debt they have. It does not GIFT to lending institutions and investors ANYTHING but it gives INDIVIDUALS AND FINANCIAL INSTITUTIONS several years to pay off high rate short term debt IF THEY NEED TO and gives EVERYONE a chance to make things better.
There can be adjustments forced on banks to allow refinance debt they should have never granted. ARM's with interest rates at credit card rates can be re-issued as fixed at appropriate rates. Not the best scenario for banks, but a better one to swallow than the whole loan. For people who could not afford the loans they took, they have time to get in a position where they can without flooding the market with foreclosed homes. Without the flood continuing into the market inventory of unsold homes will drop. Homeowners CANNOT BORROW INTO THE EQUITY OF THE GOVERNMENT POSITION so there is no additional leveraging of the risk. Banks MUST not be allowed to leverage the payments they are receiving in additional innapropriate ways. This is a chance (emphasis on chance, some are going to fail anyway) for everyone to recover, and make THEMSELVES whole instead of bailing out billionaires while leaving people who vote on the hook.
I have sent this to my state senator as well. I work in the financial and insurance industry and cannot see any good coming of the plan the way it is being formulated now. Please check my numbers and plan. As a basic worksheet it will at least give us a chance to recover, whereas what is being proposed now plunges us deeper into an unrecoverable abyss.
Respectfully yours
Tom Kleffman
Were you a good person who paid off the mortgage, lived within your means, sucked it up when you lost your job to someone's connected kid, used your life savings for a small business that barely meets the bills and are now being asked to cover the losses for the super rich? Get even. Don't pay any taxes for the next ten years and make the politically wired come and get you. Going to be hard to do if even only 3 million of us turn our backs.
Better yet, just take every last dollar out of every bank that was a party to this financial catastrophe. Let's see how long they can survive without the public's deposits. If the gov't prints money like a fool, just buy gold or some other valuable asset, and when you lose your job just go on the dole. It;s what they want, a massive middle class that can't buy anything because we are a slave to the banks for everything. Screw-it, selling my new Mercedes, trading down from a McMansion to a very low budget home, and just skipping going to malls and Ebay totally. That should pretty much give them a coronary!
Better yet, just take every last dollar out of every bank that was a party to this financial catastrophe. Let's see how long they can survive without the public's deposits. If the gov't prints money like a fool, just buy gold or some other valuable asset, and when you lose your job just go on the dole. It;s what they want, a massive middle class that can't buy anything without credit because we are a slave to the banks for everything. Screw-it, selling my new Mercedes, trading down from a McMansion to a very low budget home, and just skipping going to malls and Ebay totally. That should pretty much give them a coronary! Sad, America has devolved into a slave society where the middle class has virtually no freedom, and only the very rich or the dirt poor can enjoy life, though the rich likely enjoy it more comfortably, at least now before the depression that will hit us all, and make equals of everyone…
Can someone please tell me how it was that Paulson had $800,000,000 when he left GS (now worth only $500 mil)? And what were his credentials for being treasury secretary beside being a rich ibanker?
"Is this the US Congress or the Board of Directors of Goldman Sachs?"
For one shining moment on September 29th it was still the United States Congress.
At least hold out long enough to get the boys at GS to buy you something nice before you go all the way…
Considering the situation, I'm with you Evan.
I think the banks that participated in this should be saved, however the people responsible should go to jail for a long long time. This is a seriously destructive act that they have done, bringing the entire banking system to the verge of collapse all due to greed and stupidity. http://stocksbuyorsell.com
When you have an ex-CEO of Goldman Sachs doling out taxpayers monies without any controls and accountability—-that is plain crazy! He is guilty of conflict of interest as well as Mr. Bernanke who are ex-bankers and ex-brokers. Can one expect this individual to really protect the taxpayers interests at all?
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