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    Default Why a bail-out ?

    The more I look at this proposed bail-out, the more it stinks. Paulson and Bernanke have bought into this whole Bush Administration garbage of tolerating failure without consequences. We, the hard-working taxpayers who pay our taxes and pay our mortgages have to pick up the tab for EVERYBODY who was supposed to be looking out for us. And didn't.

    Amazingly, Paulson's plan does not provide for increased oversight and regulation. That is supposed to come AFTER the bailout is in place. Which, btw is NOT guaranteed to work. Its primary purpose is supposed to be to restore "confidence" in the very institutions that screwed up so badly in the first place. While it would really be little more than symbolic (and of little actual practical value ) it is galling that the very greedy grubbers get to keep their big fat bonuses and golden parachutes because Paulson says the "bail-out" should not be "punitive". Why Not ? Why on earth are we REWARDING bad decision making ? Worst of all, there is talk that this bailout agency will be buying these lousy mortgages at par instead of 20 cents on the dollar. Wtf is that about ?

    Let's assume arguendo, there is no bailout. What's the alternative ? A recession. A bad one. Perhaps a severe one. We've had too many sick plants in the economic garden for too long and instead of pulling them out or letting them die; we've been feeding them. ENOUGH ! Let them go belly up and we can rebuild from the ground up. Other countries have had to do it . Why not us ? Yes it will be painful and unpleasant. But this is actually an opportunity to set our entire economic house in order once and for all.

    BANKS WILL FAIL - A lot of them failed in the early 1930's and late 80's. We're still here.

    THE DOLLAR WILL TUMBLE- Other currencies have collapsed and then come back stronger than ever once their issuing countries had a good sound economic house-cleaning.

    UNEMPLOYMENT WILL RISE- What a GREAT opportunity to round up and kick out a few million illegal immigrants so their jobs can be taken by LEGAL Americans.

    STATE & LOCAL GOVERNMENTS WILL FAIL- Talk about your silver linings !! The greatest errors of the 70's were bailing out NYC and Chrysler. A good economist worried at the time NOT that the Chrysler and NYC bailouts would fail but that they would work and he was right because horrible precedents were set. Btw, his name was Alan Greenspan. Both should have been permitted to go bankrupt.
    Another opportunity to clean out a lot of dead wood and tear up a lot of sweetheart contracts. Maybe California, NYS and NJ could FINALLY be put on sound financial and fiscal footings. If they and other entities are unable to borrow money for a few years, what is wrong with that ? Let the lenders and bondholders get on line and get paid off in line within FDIC guidelines - $100,000 per person.

    Starved for money, all governments would have to carefully pick and choose what to spend on. Nothing promotes limited government better than a lack of funds.
    Last edited by Eric Stoner; 09-23-2008 at 10:37 AM.

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    Default Re: Why a bail-out ?

    Quote Originally Posted by Eric Stoner View Post
    The more I look at this proposed bail-out, the more it stinks. Paulson and Bernanke have bought into this whole Bush Administration garbage of tolerating failure without consequences. We, the hard-working taxpayers who pay our taxes and pay our mortgages have to pick up the tab for EVERYBODY who was supposed to be looking out for us. And didn't.

    Amazingly, Paulson's plan does not provide for increased oversight and regulation. That is supposed to come AFTER the bailout is in place. Which, btw is NOT guaranteed to work. Its primary purpose is supposed to be to restore "confidence" in the very institutions that screwed up so badly in the first place. While it would really be little more than symbolic (and of little actual practical value ) it is galling that the very greedy grubbers get to keep their big fat bonuses and golden parachutes because Paulson says the "bail-out" should not be "punitive". Why Not ? Why on earth are we REWARDING bad decision making ? Worst of all, there is talk that this bailout agency will be buying these lousy mortgages at par instead of 20 cents on the dollar. Wtf is that about ?

    Let's assume arguendo, there is no bailout. What's the alternative ? A recession. A bad one. Perhaps a severe one. We've had too many sick plants in the economic garden for too long and instead of pulling them out or letting them die; we've been feeding them. ENOUGH ! Let them go belly up and we can rebuild from the ground up. Other countries have had to do it . Why not us ? Yes it will be painful and unpleasant. But this is actually an opportunity to set out entire economic house in order once and for all.

    BANKS WILL FAIL - A lot of them failed in the early 1930's and late 80's. We're still here.

    THE DOLLAR WILL TUMBLE- Other currencies have collapsed and then come back stronger than ever once their issuing countries had a good sound economic house-cleaning.

    UNEMPLOYMENT WILL RISE- What a GREAT opportunity to round out and kick out a few million illegal immigrants so their jobs can be taken by LEGAL Americans.

    STATE & LOCAL GOVERNMENTS WILL FAIL- Talk about your silver linings !! The greatest errors of the 70's were bailing out NYC and Chrysler. A good economist worried at the time NOT that the Chrysler and NYC bailouts would fail but that they would work and he was right because horrible precedents were set. Btw, his name was Alan Greenspan. Both should have been permitted to go bankrupt.
    Another opportunity to clean out a lot of dead wood and tear up a lot of sweetheart contracts. Maybe California, NYS and NJ could FINALLY be put on sound financial and fiscal footings. If they and other entities are unable to borrow money for a few years, what is wrong with that ? Let the lenders and bondholders get on line and get paid off in line within FDIC guidelines - $100,000 per person.

    Starved for money, all governments would have to carefully pick and choose what to spend on. Nothing promotes limited government better than a lack of funds.
    Eric, this is an AWESOME post.
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    Default Re: Why a bail-out ?

    It gets worse. Paulson's proposal as currently constituted; gives him and his successor as Treasury Secretary unfettered authority. No agency and no court can even REVIEW what he's doing. Only Congress gets any oversight authority and we all know what a GREAT job Congress does in looking out for us.

    Chrysler was certainly a success but was NYC ? I'd argue NO. And there are disturbing parallels between the NYC bail-out and what Paulson is proposing now.
    Back in 1977, one man had authority over NYC's finances- Felix Rohatyn. In the name of preserving "democracy" by avoiding Bankruptcy and not having a Receiver appointed, Rohatyn saw to it that all the bondholders and holders of short term notes from NYC were paid back in full i.e. Wall Street was made whole.
    Who paid for it ? The NYC taxpayer. The myth was that New York STATE paid for it but NYC was the economic engine then that it is now. Most of the State tax increases were ultimately paid by NYC residents.

    Was the NYC hospital system sold off ? NO.

    Were union and other sweetheart contracts ripped up and replaced by sane agreements on pensions and health care ? NO.

    Were community grants to local "poverty pimps" like Ramon Velez and his ilk done away with ? NO. Koch expanded them.

    New York State went from relative solvency (despite Rockefeller's insane spending ) to perpetual debt. All the Municipal Assistance Corp ( MAC) did was issue bonds and make sure NYC wasn't cooking the books.

    Now, the Paulson/ Bernanke proposal is amazingly similar. It is supposed to buy up bad debts owed to major banks. It is NOT limited to mortgages BUT does include buying those mortgage backed securities that helped create the current mess. This means that Paulson will have the power to buy crap that nobody else wants and which in part is virtually guaranteed not to be worth anything. The mortgages at least MIGHT have some value if there is a chance they'll be paid back or that a foreclosure sale will result in some return. So at least part of this proposal is nothing more than a naked giveaway to major banks. Again, the major unanswered question is: Who decides to pay how much for what ? Under the current proposal- Hank Paulson.

    In the name of preserving the "credit market" and avoiding a recession, the American taxpayer will be on the hook for a minimum of $700 billion BUT everybody acknowledges it could easily top a T R I L L I O N before all is said and done.

    What NOBODY is talking about is INFLATION. That is what is really being proposed here.Start a run-off of uncollectable debt that is worth less and less in current dollars. Then what ? After inflation gets a good cranking up; what do we do then ? Same thing we had to do in 1980-1983, Have a nice deep recession to wring it out of the economy.

    Why not just bite the bullet and have the cathartic recession NOW ? Well if you ask me, it is to keep Paulson's buddies living in Short Hills and Scarsdale instead of Yonkers. The other beneficiaries include Dodd, Frank, Schumer, both Clintons and everyone else in Congress and the Executive branch who failed to mind the store. I think that the current hearings are just window dressing so the Dems can make a good show of looking out for the taxpayers ( when have they ever ? ) and at the end of the day they are going to buy the "urgency" argument and cave. Probably prodded by THEIR Wall Street buddies like Bob Rubin and Felix Rohatyn.
    The last thing they're going to do is acknowledge how we got here just weeks before an election.

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    Default Re: Why a bail-out ?

    Quote Originally Posted by Eric Stoner View Post
    Why not just bite the bullet and have the cathartic recession NOW ? Well if you ask me, it is to keep Paulson's buddies living in Short Hills and Scarsdale instead of Yonkers. The other beneficiaries include Dodd, Frank, Schumer, both Clintons and everyone else in Congress and the Executive branch who failed to mind the store. I think that the current hearings are just window dressing so the Dems can make a good show of looking out for the taxpayers ( when have they ever ? ) and at the end of the day they are going to buy the "urgency" argument and cave. Probably prodded by THEIR Wall Street buddies like Bob Rubin and Felix Rohatyn.
    The last thing they're going to do is acknowledge how we got here just weeks before an election.
    I totally agree. The chickens have come home to roost and the big dogs are trying to put off having to pay for all that greed and elbow rubbing between NY and Washington. This is just a shame on Washington in general.
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    Default Re: Why a bail-out ?

    If you actually read what Hank and Ben told Dodd's Committee today; this is blatant "kiting" by the Feds. It's just perpetuating what got us here. The Feds are supposed to buy "bad debt" from the banks freeing them to issue "good debt".
    Uh-huh. Who decides it's "good debt" ? These are the same clowns that issued the "bad debt"in the effing FIRST PLACE ! And the additional Federal Deficit and enlarged National Debt is "good debt" how ?

    There are no reforms contained in the proposal.

    There are no safeguards.

    There are no pricing guidelines.

    There are no eligibility guidelines.

    There is no way to challenge anything Paulson does. Congress retains "oversight"
    BUT under the proposal he would already have the authority. It is silent on limiting or revoking same.

    Both Paulson and Bernanke admit the goal is to avoid a recession. Not a Depression. A recession. Afaic, we've never needed one more than right now.

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    Default Re: Why a bail-out ?

    Of all the various issues raised by the proposed bail-out; the funniest ( to me ) is the squawking by Wall St. execs over proposed limits on their pay if and only if they sell their "bad debt" under the proposed bail-out or under the Bear-Stearns and AIG bail-outs.

    McCain has suggested that the Chief Execs. of troubled firms getting Federal help get no more than the President , $400,000.

    George Will suggested months ago that they be limited to the pay of a GS-18- the highest paid Federal Civil Servants- somewhere around $150,000 a year.

    Ironically , it was Bill Clinton and the Dems who helped promote the explosion in executive compensation. In 1993, they limited the tax deductibility of executive salaries to $1 million. The loophole was that it didn't apply to bonuses and stock options. And when some companies performed well, their earnings and share prices went way up and the stock options became worth tens of millions.

    Wall Street firms, especially, saw executive compensation explode. First in the late 90's and then again from 2004 to 2007.

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    Default Re: Why a bail-out ?

    wow, just wow..........so I guess you're against civil rights, truth in politics, etc....

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    Default Re: Why a bail-out ?

    Quote Originally Posted by G-Real View Post
    wow, just wow..........so I guess you're against civil rights, truth in politics, etc....
    There seem to be more people who are on that wavelength than I thought around here.
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    Default Re: Why a bail-out ?

    What? Now it took 30 YEARS for this to happen and it was all the dems fault for making sure people weren't discriminated against and could buy houses? So the numerous repub presidents we had did nothing about this and they are in the clear? If this was such a horrible piece of regulation, why didn't someone end it sooner? This bubble started RECENTLY and is a direct result of DEREGULATION and GREED.
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    Default Re: Why a bail-out ?

    Quote Originally Posted by Miss_Luscious View Post
    What? Now it took 30 YEARS for this to happen and it was all the dems fault for making sure people weren't discriminated against and could buy houses? So the numerous repub presidents we had did nothing about this and they are in the clear? If this was such a horrible piece of regulation, why didn't someone end it sooner? This bubble started RECENTLY and is a direct result of DEREGULATION and GREED.
    There was and is nothing wrong with stopping "red-lining". Just because you happened to live in a particular neighborhood was NOT a sufficient justification for a bank not to write you a mortgage. But Johnson at Fannie Mae and Cuomo at HUD went far beyond that pushing through regs MANDATING mortgages regardless of the condition of the borrower. It REALLY exploded when Raines took over Fannie Mae and the mortgage backed secuities started being issued.

    There WERE "Cassandras" warning about what was happening including Greenspan, McCain and even Bush. Dodd, Frank and other Dems blocked every attempt to rein in Fannie and Freddie in the name of continuing lending to people that YOU would NEVER lend YOUR money to with any reasonable hope of being paid back.

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    Default Re: Why a bail-out ?

    Quote Originally Posted by Eric Stoner View Post
    But Johnson at Fannie Mae and Cuomo at HUD went far beyond that pushing through regs MANDATING mortgages regardless of the condition of the borrower.
    I would really like to see these mandates that forced mortgages for any and everyone. If you can supply proof of this allegation, I'll have to concede that point. But as far as I know, you still have to have a minimum credit score and income to get these freddie/fannie mortgages (I researched both over the years while I was trying to buy a house.) If what you and others are saying is true, then that really is fucked up.
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    Quote Originally Posted by Katrine View Post
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    Default Re: Why a bail-out ?

    The wealthy elite (read; republican base) are freaking out.

    "OMG! I won't be able to afford that new Gulf Stream Luxury Jet! Wah! Wah! Tax payers need to bail me out so I can buy a fleet of limousines for my cloned pets! Help! We're all doomed!"


    LOL! Whatevah...

    Taxpayers, let's buy ourselves some banks and insurance companies, shall we? The wealthy Republican elite need to sleep in that bed they made for themselves. God forbid, they might actually have to get jobs! Oh the humanity!"

    (snip)Schwarzman has recently become the poster child in a Washington debate over what many consider to be the mother of all tax dodges, "carried interest." He received a $350.2 million in cash distributions last year, a 12 percent pay cut from 2006. But the clincher is what he paid in taxes.(snip)

    Unless you occupy the top 1% of income earners, you are going to be fine. Or at least should be fine in a few years. Right now the lack of middle class folks is a problem. We will dig out, but the Wealthy Republican Elite are on the down cycle.

    Buh-Bye!


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    Default Re: Why a bail-out ?

    Quote Originally Posted by Miss_Luscious View Post
    I would really like to see these mandates that forced mortgages for any and everyone. If you can supply proof of this allegation, I'll have to concede that point. But as far as I know, you still have to have a minimum credit score and income to get these freddie/fannie mortgages (I researched both over the years while I was trying to buy a house.) If what you and others are saying is true, then that really is fucked up.
    Melonie spelled it out beautifully and it is best to read her re-cap but I'll hit the highlights.
    The Community Reinvestment Act was originally passed under Carter in 1977 with a laudable goal- increasing home ownership in low income areas. It had mild success as it required minimal investment by banks.

    In 1993 a modest program was expanded under Clinton and his head of HUD, Andrew Cuomo and included a REQUIREMENT that banks write a certain percentage of mortgages in "underserved" areas. In certain neighborhoods there are few, if any, people who could legitimately qualify for a mortgage. Jim Johnson took over Fannie Mae and he radically expanded mortgage purchases and bond issuances. He left under a cloud in 1999 and was replaced by Franklin Raines who expanded the "bonus system" Johnson had instituted. Bonuses to top management at Fannie Mae based on total earnings- the amount of bonds sold. Bonds could only be sold if there were mortgages written by banks. More mortgages written - more mortgages purchased by Fannie Mae - more bonds sold-bigger bonuses for Raines, Jamie Gorelick and other Fannie Mae execs. An artificial demand for mortgages was created by Fannie and Freddie which was filled by banks writing them for anybody and everybody. People who NEVER would have qualified for a mortgage - spotty employment histories; spotty credit histories; lousy credit ratings were able to get mortgages at low introductory rates with minimal if any down payments. But the rates were ADJUSTABLE and often there were large balloon payments i.e. many of the borrowers NEVER had any serious prospect of repaying the mortgage unless they hit the lotto.

    All was well so long as housing prices kept going up because in the case of foreclosure there would be plenty of sale proceeds to pay off the mortgage enabling Fannie and Freddie to pay on the bonds they issued.

    Now the argument can be made that the banks are trying to use the CRA as an alibi for why they wrote crappy mortgages BUT they were REQUIRED to do it. A certain percentage of their mortgage portfolio HAD TO BE in certain neighborhoods. I'm sorry but I missed the influx of "yuppies" and "buppies" into South Central; East New York; Detroit; East St. Louis; the 9th Ward of New Orleans etc. etc. There wasn't any and the actual residents of those areas lacked enough money for a down payment; had insufficient incomes to withstand the spike in energy and food prices and they started defaulting on their mortgages. You want to know how crazy it got ? Vacation homes in the Poconos were being marketed to welfare families ! I'm not making this up.
    A glut of housing coupled with increased interest rates and a LOT of foreclosures caused a dramatic drop in housing prices meaning that foreclosure sales either weren't taking place or were bringing inadequate sale prices.

    Fannie and Freddie were holding TRILLIONS in mortgages. When The Bush Administration and Alan Greenspan started sounding the alarm as early as 2003; Barney Frank flat out said there was no crisis; no problem and NO NEED for additional regulation and oversight. Strange is it not ? The Party of "Regulation" and corporate "RESPONSIBILITY" did NOT want those goals and virtues to apply to Fannie and Freddie. It didn't have anything to do with the huge campaign contribs they were getting from Fannie and Freddie ? Or giant mortgage brokers ?
    Chris Dodd's obstruction had nothing to do with the sweetheart low rate mortgage he got from Countrwide ? Not to mention all the votes they were counting on from all those new homeowners and the property taxes they were supposed to be paying on their new homes which many towns and cities were floating loans on i.e short term paper.

    The trillions in mortgages supported trillions in bonds and other mortgage backed securities. When the mortgages couldn't be paid; interest couldn't be paid on the bonds.

    I haven't even touched the credit swap defaults that sprang up where people were literally betting on the ability and inability of someone else to pay off their debts.

    There's more to it, to be sure, but the underlying root cause of this entire mess is the writing of loans to people who couldn't pay them back. And banks were REQUIRED by the CRA and its REGS to do it. When she was A.G. Janet Reno threatened investigation and prosecution of banks who were allegedly ducking their "responsibilities under the CRA. It was just an AMAZING COINCIDENCE that her former Asst. A.G. Jamie Gorelick had just joined Fannie Mae and was starting to collect on millions in bonuses.

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    Default Re: Why a bail-out ?

    Quote Originally Posted by Miss_Luscious View Post
    I would really like to see these mandates that forced mortgages for any and everyone. If you can supply proof of this allegation, I'll have to concede that point. But as far as I know, you still have to have a minimum credit score and income to get these freddie/fannie mortgages (I researched both over the years while I was trying to buy a house.) If what you and others are saying is true, then that really is fucked up.
    As for income checks and credit checks; the mortgage brokers gamed the system by putting a lot of lipstick on a lot of pigs. The underwriters at the credit rating agencies got a fee for APPROVING people. Fannie and Freddie were buying mortgages they NEVER would have gone near before Johnson and Raines took over. It was a classic case of government interference distorting the market. Mortgages that otherwise never would have been issued or purchased by Fannie and Freddie leading to bonds that otherwise never would have been issued.

    Compounding the problem was Nancy Pelosi who rammed through a waiver of the mortgage limit at Fannie and Freddie. Used to be they couldn't buy mortgages over $250,000 but Nancy engineered a number of large loopholes.

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    Default Re: Why a bail-out ?

    Hmm...it seems to me that they were required to do mortgages in those areas but NOT to ignore credit histories, job histories, income etc. It seem that they started ignoring those things because they were greedy and wanted those bonuses. That it some fucked up shit. Greed will always come back to bite you in the ass and now everyone is suffering so a few people cold pocket a few extra million. Disgraceful. There is plenty of blame for both the dems and the repubs to share so I'm not going to keep pointing fingers.

    And thanks for explaining that position a bit better. No offense to Melonie but she's long winded and often mixes her opinion in with the facts which makes everything become convoluted. Not to mention the various (snips) and (words words words words words words words words words exclamation point!) she likes to do. I need things to be more to the point when I read them.
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    Default Re: Why a bail-out ?

    Quote Originally Posted by Miss_Luscious View Post
    Hmm...it seems to me that they were required to do mortgages in those areas but NOT to ignore credit histories, job histories, income etc. It seem that they started ignoring those things because they were greedy and wanted those bonuses. That it some fucked up shit. Greed will always come back to bite you in the ass and now everyone is suffering so a few people cold pocket a few extra million. Disgraceful. There is plenty of blame for both the dems and the repubs to share so I'm not going to keep pointing fingers.

    And thanks for explaining that position a bit better. No offense to Melonie but she's long winded and often mixes her opinion in with the facts which makes everything become convoluted. Not to mention the various (snips) and (words words words words words words words words words exclamation point!) she likes to do. I need things to be more to the point when I read them.
    Why have an internal limit on the Sub-Prime Mortgages you're willing to write if Fannie and Freddie were permitted by the CLINTON Administration to buy them ?
    Prior to Clinton and Cuomo changing the Regs. to the CRA, Fannie and Freddie were limited to buying "good mortgages". They used to be totally safe and sound investments. First Johnson and then Raines went "all in " into the sub-prime market while pocketing huge bonuses.
    Bear- Stearns and others securitized the mortgages and were insured by AIG.

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    Default Re: Why a bail-out ?

    Franklin Raines was the one who lowered down payment requirements that had been in place for DECADES because : " there are a lot of people who fall just below our lending requirements who want to buy a house". That quote was in response to Clinton's relaxation of regs that permitted Fannie an dFreddie to buy sub-prime mortgages.

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    Default Re: Why a bail-out ?

    Oy...all this makes my head spin.

    ((((head spinning))))

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    Default Re: Why a bail-out ?

    Taxpayers, let's buy ourselves some banks and insurance companies, shall we? The wealthy Republican elite need to sleep in that bed they made for themselves
    not wanting to dispel any highly cherished myths, but ...

    Hank Paulsen is a Democrat
    the vast majority of officers at large Wall St financial institutions are Democrats
    damn near everyone working for Fannie and Freddie are Democrats

  21. #21
    God/dess threlayer's Avatar
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    Default Re: Why a bail-out ?

    The blame game is getting boring. Let's be equitable and realistic about the blame; there is certainly enough to cover almost everyone in power. And then let's get on with planning for and initiating the recovery.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  22. #22
    Veteran Member Ina's Avatar
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    Default Re: Why a bail-out ?

    Quote Originally Posted by sapphiregirl View Post
    Oy...all this makes my head spin.

    ((((head spinning))))


    I'm with you on this one.
    Ah! yes and the blame game is getting old, how long have we been playing it for?
    [SIGPIC][/SIGPIC]

    "It is better to be an open sinner than a false saint"

  23. #23
    God/dess Sophia_Starina's Avatar
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    Default Re: Why a bail-out ?

    Quote Originally Posted by Eric Stoner View Post

    THE DOLLAR WILL TUMBLE- Other currencies have collapsed and then come back stronger than ever once their issuing countries had a good sound economic house-cleaning.
    Really? For example......

    Quote Originally Posted by Eric Stoner View Post
    UNEMPLOYMENT WILL RISE- What a GREAT opportunity to round up and kick out a few million illegal immigrants so their jobs can be taken by LEGAL Americans.
    Or use this as an excuse to fire people earning an honest wage and then hire MORE illegal immigrants (who can be paid less) in order to save money.
    Quote Originally Posted by Jay12 View Post
    ^What Sophia said.
    Quote Originally Posted by yoda57us View Post
    I wish there was an "auto-like" setting that I could just have applied to all of your posts Sophia....

  24. #24
    Banned Melonie's Avatar
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    Default Re: Why a bail-out ?

    Really? For example......
    the Reichsmark ... which collapsed under the Weimar gov't but became very strong under the Nazi government which followed.


    The blame game is getting boring. Let's be equitable and realistic about the blame; there is certainly enough to cover almost everyone in power
    if we're going to learn from this situation, and attempt to cure it at great US taxpayer expense, assigning blame correctly is a fundamental requirement. Once that is done, taking appropriate action which actually cures the problem rather than papering it over is the next fundamental requirement. Arguably, Paulsen's approach does the latter and cures nothing in the long run ...

    (snip)To the Speaker of the House of Representatives and the President pro tempore of the Senate:

    As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

    1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

    2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

    3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

    For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.


    Signed (updated at 9/25/2008 8:30AM CT)

    Acemoglu Daron (Massachussets Institute of Technology)
    Adler Michael (Columbia University)
    Admati Anat R. (Stanford University)
    Alexis Marcus (Northwestern University)
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    Zitzewitz Eric (Dartmouth College)"(snip)

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    God/dess threlayer's Avatar
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    Default Re: Why a bail-out ?

    Quote Originally Posted by Melonie View Post
    ...
    if we're going to learn from this situation, and attempt to cure it at great US taxpayer expense, assigning blame correctly is a fundamental requirement. Once that is done, taking appropriate action which actually cures the problem rather than papering it over is the next fundamental requirement....
    Rather than BLAME, let us find the mechanisms that caused this and reasonable solutions. The blame is almost everywhere, and if everyone who shared in some blame got punished, there would be very few left in the government or for that matter, the public who would escape some sort of deserved punishment. And many are already being punished.

    The Blame Game is just another political ploy to gain power over someone else. Whereas, what we NEED is the best compromise long-range solution for ALL of us based on what we find that went wrong, and that doesn't start by nailing a group of blamees to the cross. After all, with the widespread and long term setup this had from both sides, those who we would crucify would merely be scapegoats.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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