Incredible destruction. Monstrously inept Federal mismanagement. Lives ruined. - Mercedes-Benz Forum

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post #1 of 14 (permalink) Old 09-19-2008, 11:10 AM Thread Starter
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Incredible destruction. Monstrously inept Federal mismanagement. Lives ruined.

And I bet you thought I was talking about the hurricane.



Rescue cost: Hundreds of billions
Washington unveils sweeping efforts to save financial system.


NEW YORK (CNNMoney.com) -- Treasury Secretary Henry Paulson on Friday didn't mince words when it came to the cost of his latest proposal to stem the credit crisis.

"We're talking hundreds of billions of dollars - this needs to be big enough to make a real difference and get at the heart of the problem," he said. "This is the way we stabilize the system."

Paulson, speaking at a brief press conference in Washington, offered few details on his plan to help banks offload their toxic mortgage assets. Treasury is drafting a legislative proposal for lawmakers to consider this weekend.

The speculation is that the Treasury will help banks clear their balance sheets of illiquid mortgage assets by buying them at a discount.

One way the plan could work is for the Treasury to make the purchases through a bidding process. Companies that want to offload their hard-to-sell assets from their balance sheets would bid to sell to the government at a huge discount. The company willing to sell at the lowest price wins.

The government would then be able to sell the assets back into the market when it wanted.

The idea is that the government would buy at below-market rates and sell for a gain when the housing market recovers.

"The government could make a profit, a substantial profit," said Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm.

This optimistic scenario hinges not only on a housing recovery but on how big a discount the government gets when it buys banks' toxic mortgage assets to begin with.

The problem is that the assets have proven extremely difficult to value as the demand for them has disappeared.

"The pricing mechanism is going to be central," Seiberg said.

On Friday, Sen. Richard Shelby, R-Ala., the ranking member on the Senate Banking Committee, told CNNMoney.com that the latest plan from Treasury could cost up to $500 billion. Awaiting details on the plan from Treasury, Shelby said, "I think this is too big to just accept ... without understanding who pays."

If he's right about the $500 billion, the headline figure on the government's attempts to stem the credit crisis hits $1.3 trillion. That includes all the loans, investments and new programs committed by the Federal Reserve and Treasury this year.

But that doesn't mean that taxpayers would end up paying anything near that amount, because in exchange for its commitments the government will get saleable and income-producing assets.

If these efforts result in a net cost to the taxpayer, it's a better bet than the alternative, Paulson said.

"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," he said. To top of page
First Published: September 19, 2008: 12:05 PM EDT

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

-President Barack Obama, 1st Inaugural address
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post #2 of 14 (permalink) Old 09-19-2008, 11:55 AM
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Past bailouts have always been a net plus for the government and taxpayers. Government buys huge quantities of assets at fire sale prices, holds them until markets stabilize, and then sells them for a big profit! Everybody wins!

Don't believe everything you think
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post #3 of 14 (permalink) Old 09-19-2008, 12:10 PM Thread Starter
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Past bailouts consisted of helping out a car company here and there. Given the size of global credit markets, this "bailout" may be pissing in a windstorm. This has now spread to the global markets.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

-President Barack Obama, 1st Inaugural address
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post #4 of 14 (permalink) Old 09-19-2008, 12:24 PM
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The last big bailout was the S&L crisis a decade or so ago, where over 1,000 financial institutions failed and the RTC was created to buy up bad assets. RTC later sold them for big profits. That was a big winner for the US and taxpayers!

Don't believe everything you think
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post #5 of 14 (permalink) Old 09-19-2008, 02:02 PM
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"The Incredible Destruction. Monstrously inept Federal mismanagement"

Yet these are the same morons the liberals and democrats want to put in charge (or certainly become much more involved in) of the health care system.

The surest way to screw anything up is to involve the government.

This will be nothing compared to the bill the tax payers receive for health care.
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post #6 of 14 (permalink) Old 09-19-2008, 04:52 PM
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i'm totally ok with all these financial institutions falling on their faces. gov. should not be bailing out the corps at any cost.



in political asylum
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post #7 of 14 (permalink) Old 09-19-2008, 06:03 PM
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Originally Posted by mzsmbs View Post
i'm totally ok with all these financial institutions falling on their faeces. gov. should not be bailing out the corps at any cost.
let me correct that for you...

Ross

OzBenz

beware of fundamentalists

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post #8 of 14 (permalink) Old 09-20-2008, 04:19 AM
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The last big bailout was the S&L crisis a decade or so ago, where over 1,000 financial institutions failed and the RTC was created to buy up bad assets. RTC later sold them for big profits. That was a big winner for the US and taxpayers!


That's funny, I thought when investors invested in something and it made money then they woud get a fair share of the profits. Has anyone heard of these great profits being paid back tot he rightful investors in all of these bailouts that Jay talks about?
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post #9 of 14 (permalink) Old 09-20-2008, 06:14 AM
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I believe America is doing the right thing, regardless the cost. If not it could and is beging to cause a global market crisis.

ERIC.

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post #10 of 14 (permalink) Old 09-20-2008, 06:55 AM
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I believe America is doing the right thing, regardless the cost. If not it could and is beging to cause a global market crisis.


SO how come the Global countries are not contributing and tossing in a fair share to save this from becoming a golobal crisis?
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