More Wall Street Woes
Sep. 29th, 2008 03:30 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
unforthHonestly, I can't figure out if the Pres's financial bail out was a good idea or not. My instincts said run like hell, but everything I read about had me thinking it might be necessary. But now it's moot - House Rejects Bailout 228 - 205. Both support and opposition to the bill appear to have been at least somewhat bipartisan. As a result, the Dow Jones Industrial has dropped almost 700 points so far today. The S&P 500 has dropped 8%. The exchanges in London and Paris were down 5% at closing, HK lost 4.3%. I suspect (fear?) that tomorrow will be worse on the international scene.
Meanwhile, Citigroup has bought Wachovia, meaning that - as far as I recall - four out of the five major investment banks in the country have now folded. I can't remember where I read that, though, so it might be incorrect. Oh, and Washington Mutual is gone, too. Wachovia had been the nation's fourth largest bank. Now, Citigroup, JP Chase/Morgan, and Bank of America control almost a third of all deposits in the country. Including almost all of mine (I have accounts with Citi and Chase...).
I don't know what happens next, but it frightens me.
Edit: After a bit of looking, I've finally found an article that mentions the break down on partisan lines - 95 democrats and 2/3rd of republicans voted against the bill. The article is from the BBC, and mentions a few of the more international affects of the crisis, as well. More BBC comments. The break down is 140 Dems and 65 GOP pro, 95 Dems and 133 GOP against.
Listening to the talking head on MSNBC ripping apart McCain's financial guy, who is attempting to blame the democrats, is really funny.
McCain is blaming the Democrats - that Nancy Pelosi drove the Republicans away. Democrats are saying that Republicans are out of their minds for putting their hurt feelings ahead of the good of the American's. But WAS it a good idea? This is VERY hard to figure out. Here are some sections of that speech. Because it was so Partisan, the Republicans Changed Their Minds. Either that, or they are covering their asses. Meanwhile, McCain, who apparently did nothing whatsoever over the weekend, has been lying outright - both by saying that he did something, and by accusing Obama of doing nothing. The fact that his lies are SO transparent and negatable, and the fact that many American's buy them ANYWAY, scares the heck out me. But not as much as the economic crisis!
Either way, though, the real questions that I have relate to the plan itself: sure, not having it hurts like hell and is going to cause big problems, but is it better in the long run that we haven't allowed the government to be that involved in our financial process?
As always, I start at Wikipedia.
The Dow has dropped 770 points, representing the largest point drop in one day in the history of the exchange (but NOT the largest percentage drop - which is significant).
What does the plan entail?
As I have previously discussed, subprime mortgages are at the core of the economic crisis. These mortgages, which were high-risk to the banks and, well, crappy, were "repackaged" as mortgage-backed securities, which were then sold. When the borrowers default on their loan, these securities become valueless. Banks need to hoard every cent they've got in order to meet their expenses in the face of this danger, and so confidence has declined, and banks are now refusing to lend to pretty much anyone, even those with excellent credit and high ability to pay back.
The bailout would have involved the government spending $700 billion. The main use of this money, as I understand it, would have been to buy these crappy mortgage-backed securities (thus pretending that they have value!), infusing money in to the market, and once again repackaging the mortgage-backed securities as Treasury back securities, which would be sold - potentially (ultimately) at a profit to the government (and therefore to the people).
At the same time, "bank runs" have begun on money market mutual funds, which make their money by conducting investment activities related to short-term debt. Only three of these institutions have ever failed, two of those failures are in the past two weeks. The Bailout Package involved offering these institutions access to more funds, so that they would be able to better respond to the runs.
The plan would have involved increased liquidity, and would have slackened some of the regulations on certain types of banking. The Secretary of the Treasury has never had the power to conduct the activities in this bill; hence, it would have represented unprecedented authority invested in that position.
I have to go, but I definitely will be doing more research on this after I get back from walking the dog. :)
In an only somewhat related topic, here's a neat page with lots of election polling data. It seems pretty good.
Meanwhile, Citigroup has bought Wachovia, meaning that - as far as I recall - four out of the five major investment banks in the country have now folded. I can't remember where I read that, though, so it might be incorrect. Oh, and Washington Mutual is gone, too. Wachovia had been the nation's fourth largest bank. Now, Citigroup, JP Chase/Morgan, and Bank of America control almost a third of all deposits in the country. Including almost all of mine (I have accounts with Citi and Chase...).
I don't know what happens next, but it frightens me.
Edit: After a bit of looking, I've finally found an article that mentions the break down on partisan lines - 95 democrats and 2/3rd of republicans voted against the bill. The article is from the BBC, and mentions a few of the more international affects of the crisis, as well. More BBC comments. The break down is 140 Dems and 65 GOP pro, 95 Dems and 133 GOP against.
Listening to the talking head on MSNBC ripping apart McCain's financial guy, who is attempting to blame the democrats, is really funny.
McCain is blaming the Democrats - that Nancy Pelosi drove the Republicans away. Democrats are saying that Republicans are out of their minds for putting their hurt feelings ahead of the good of the American's. But WAS it a good idea? This is VERY hard to figure out. Here are some sections of that speech. Because it was so Partisan, the Republicans Changed Their Minds. Either that, or they are covering their asses. Meanwhile, McCain, who apparently did nothing whatsoever over the weekend, has been lying outright - both by saying that he did something, and by accusing Obama of doing nothing. The fact that his lies are SO transparent and negatable, and the fact that many American's buy them ANYWAY, scares the heck out me. But not as much as the economic crisis!
Either way, though, the real questions that I have relate to the plan itself: sure, not having it hurts like hell and is going to cause big problems, but is it better in the long run that we haven't allowed the government to be that involved in our financial process?
As always, I start at Wikipedia.
The Dow has dropped 770 points, representing the largest point drop in one day in the history of the exchange (but NOT the largest percentage drop - which is significant).
What does the plan entail?
As I have previously discussed, subprime mortgages are at the core of the economic crisis. These mortgages, which were high-risk to the banks and, well, crappy, were "repackaged" as mortgage-backed securities, which were then sold. When the borrowers default on their loan, these securities become valueless. Banks need to hoard every cent they've got in order to meet their expenses in the face of this danger, and so confidence has declined, and banks are now refusing to lend to pretty much anyone, even those with excellent credit and high ability to pay back.
The bailout would have involved the government spending $700 billion. The main use of this money, as I understand it, would have been to buy these crappy mortgage-backed securities (thus pretending that they have value!), infusing money in to the market, and once again repackaging the mortgage-backed securities as Treasury back securities, which would be sold - potentially (ultimately) at a profit to the government (and therefore to the people).
At the same time, "bank runs" have begun on money market mutual funds, which make their money by conducting investment activities related to short-term debt. Only three of these institutions have ever failed, two of those failures are in the past two weeks. The Bailout Package involved offering these institutions access to more funds, so that they would be able to better respond to the runs.
The plan would have involved increased liquidity, and would have slackened some of the regulations on certain types of banking. The Secretary of the Treasury has never had the power to conduct the activities in this bill; hence, it would have represented unprecedented authority invested in that position.
I have to go, but I definitely will be doing more research on this after I get back from walking the dog. :)
In an only somewhat related topic, here's a neat page with lots of election polling data. It seems pretty good.
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
no subject
Date: 2008-09-30 12:21 pm (UTC)I don't know how to feel about the bill, either. A lot of people I respect are against it, but just because I respect them and trust their judgment doesn't mean they're right this time. Good sense and good values can still make wrong choices at times. Oh dear. It may be that we HAVE to support these disgusting corrupt losers whose greed brought this mess upon us because they WILL bring us tumbling down with them if we don't, even though that's not right and it hurts to admit it. I only hope that after we help them (if we do so) we turn around and smack them some regulation on them and their pathetic greed-corrupted souls.
But I don't know. Though I'm scrambling to keep up, I'm not educated enough to say. I only hope those who ARE so educated make the right choice!
no subject
Date: 2008-09-30 01:40 pm (UTC)That's what I'm afraid of too. I don't know enough to see how far the repercussions will go, either way. From a personal perspective though, it is tempting to let them hang. I have very little pity for companies making millions (billions!) on bad deals. I don't have much for people who signed mortgage contracts they either didn't read, or bought houses they couldn't really afford.
I also think that perhaps saving these corporations is going at the whole thing backwards. Maybe it should work like the economic stimulus checks. If people have money they'll spend it. These gigantic companies may fall over, but whoever buys them will still be making money and the people who need the cash to pay their mortgages or whatever would have it. I dunno. Sounds good in theory anyway.