Everyone should read--truth about bailout

[Guest]

No comment from me necessary. Here it is:

http://www.youtube.com/watch?v=H5tZc8oH--o

[Guest]

If we don't understand how the current financial crsis happened, there's no way to make corrections, replace peole, etc. to avoid similar things from occurring in the future.

But now is not the time to be mad. It's the time to be smart and attentive and understanding of what needs to be done to minimize the damage from the mess. Attached is a posting that I just made on another thread here in the Political Forum. It applies to the original posting here, as well.
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As a longtime retired banker, let me tell you why some sort of "bailout" is critically necessary now...and why "just say NO" won't work and will result in severe financial damage to all of us.

Banks and other regulated financial institutions now have way too many loans on their books that have or will default and whose book value is doubtful. As the loans decline in value, the difference between book and market value must, by regulation and accounting requirements, be written off, causing a loss on the P&L. When the loss from the P&L is reflected on the bank's balance sheet, it is a charge against the capital accounts. An adequate amount of capital is a requirement of the bank regulations for banks to make loans.

So what we have here in the current financial mess is a huge number of loans (most estimates have the amount as well more than $1 trillion) that reside on bank's books that will be written down or even written off, reducing the bank's capital accounts dollar for dollar. The only way that those capital accounts can be restored or built up is thru retaining profits (not likely that the banks will be profitable anytime soon) or thru the sale of equity (no company would contemplate selling stock in this market). The result of the mess is that not only will banks not be able to make new loans, but they will likely have to reduce the amount of loans they have on their books. Without credit, our economy and the economy of the rest of the world will grind to a halt very, very quickly. If you consider how banks and lenders can correct this problem--increasing capital by being profitable or selling equity--you can easily see how long it will take for the economy to "re-start" and work itself out of this situation. It could be years of negative economic growth, a severely depressed stock market, much incresed unemployment, inflation, an even less valuable dollar--basically a long depression.

Everyone should be incensed at those that caused this problem--Wall Street, greedy bankers, an inattentive Congress, an administration that purposefully weakened bank regulations, lobbyists who "bought off" the politicians, and an American public who didn't give a damn. But at this point, there's no point in being mad and saying No, No, No. That would be cutting off our noses to spite our faces. Unfortunately what needs to be done, in one way or another, is to remove the bad loans from the bank's books so that they can use their capital to make new loans and keep the economy moving--not necessarily growing for awhile, but at least moving. Basically, the government--you and me--will be required to dig deep into our pockets and the pockets of our children and grandchildren to provide the capital to buy the loans and remove them from the banking system. That needs to be done NOW. Correcting the causal factors and getting rid of the people who were behind this mess will have to wait until later. I'm hopeful that will happen and that the public will maintain its collective anger until things are done--but that may be wishful thinking.

I hope this helps everyone understand what's happening and why significant action by our government is needed quickly.

[Guest]

Sounds to me that"Retired guy" just wants to point the finger at his political party of choice, rather than fix the problem.

I read the link, and it is a poster child for "they did it" politics.

Kahuna, on the other hand, offers a solution, rather than a rock to throw at the opposition.

Thanks,
Tony:popcorn:

[Guest]

No comment from me necessary. Here it is:

http://www.youtube.com/watch?v=H5tZc8oH--o
TonyC:

You are quite wrong in your assumption for my reason to post the link. When faced with facts, try to accept them and then correct actions in the future. That was my point. Yours was more to point fingers as to motive.

Sorry you feel that way. You will learn nothing.

[Guest]

"they did it" politics

Enough of the aspersions!
Let's tell it like it is, the Democrats have run this country completely into the ground. Enough of all this dancing around the real reasons for this mess. All of those people who seem to think they know what went on and how to fix it can spin the heck out of it but it all boils down to the Democrats, plain and simple. Shame on the party, shame on everyone, shame on those who deny that they are the most quilty of the quilty. Such a travesty and we continue to stay on these forum pages and throw slurs and semblances of ideas back and forth, it is pathetic. The Democrats have let our country down, big time, in the worse way. What has happened to pride in what you do and pride in your country.
Shame on you, shame on the Democrats. No more denial, they are GUILTY and it borders on treason!! :Screen_of_Death:
Now Dems are compounding it with this ridiculous bailout. Let the free markets work and the government keep out.

Now we are getting this shoved down our throats with so much pork, along with the illegal bailout.

[Guest]

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Unfortunately what needs to be done, in one way or another, is to remove the bad loans from the bank's books so that they can use their capital to make new loans and keep the economy moving--not necessarily growing for awhile, but at least moving. Basically, the government--you and me--will be required to dig deep into our pockets and the pockets of our children and grandchildren to provide the capital to buy the loans and remove them from the banking system. That needs to be done NOW. Correcting the causal factors and getting rid of the people who were behind this mess will have to wait until later. I'm hopeful that will happen and that the public will maintain its collective anger until things are done--but that may be wishful thinking.
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I disagree. The government setting up the "USA Bank and Trust" to buy these loans doesn't remove them from anywhere. The loan contracts simply find themselves held by a government entity, and the publicized plan is to eventually sell them back to private banks. The loan contracts just don't disappear.

Unless the causal factors are identified and corrected as part of any bailout, the problem continues despite the bailout, meaning the open hand just comes around again looking for more money. Going after the people is a job for the Attorney General, but not eliminating the root causes of the problem is like pouring more motor oil into a leaking crankcase. The engine may continue to run for a while, but it will seize up once the oil drains out again because the problem (the leak) was not fixed.

Until the fixes occur in the banking system to insure this type of greed and stupidity is stopped, the problem just keeps going even after the $700B has been allocated.

[Guest]

The bailout has failed to pass the House and the Dow is down 600 points. I am on my way to the bank to pull $15,000 so I have some money on hand when this thing blows sky high.

We should vote them all out....