The Pros and Cons of a Government Bailout

rawr?!

I understand the "bailout" is designed to stabilize the economy, and what must be done must be done. HOWEVER, there must be some accountability for the cause. If people bought houses with terms they cannot afford, that's just too bad. They loose their houses. The government owns these houses if a bailout occurs. That means the taxpayers own those houses. As a taxpayer, I say rent these houses to the former owners. As for the lenders who irresponsibly coaxed people into those terms should face consequences also. I would have no problem with hard prision time, probation, banishment from further real estate dealings, and/or repayment by recovery of *their* assets. If a bailout is to occur, accountability simply MUST be included. The public will not stand for less. If accountability details cannot be determined in a timely enough manner to stabilize the economy, then a basic structure of an acountability plan must be presented to the American people or there will be a massive public reation in terms of votes from constituencies.

This bail out is good and bad. Good... it will prevent a depresion but bad... it is going to be a crutial step in a long trek tword comunism.

What are the long term effects of a government bailout?

Vohmie those calls you got could be related what's going with Treasury,Congress and the present bailout related with Wall Street. Becouse Paulson wants to create newer version ot the RTC to take in the toxic bad loans related to home foreclosures. That's the best explaination I can honestly come up with. I suggest you contact the Realtors and Bank Association in your state to check up on status.

My business is to prepare homes for resale. Recently I contacted several mortgage companies in Western Pennsylvania and a few with federal ties regarding foreclosures. I was told "We got the loan, we could care less if they get their money. You need to contact the smaller banks to see if they need your services". I was advised that mortgage companies do not want to put anything in to the foreclosed homes since they probably won't get their money out of it. Question - why not put a few thousand dollars into the home to ensure it is clean and organized to show better and to get the most out of it? Most foreclosed homes are left in shambles. The tax payer is ultimately paying the price. Can someone please explain this to me? Thanks

We cannot stand by to permit bank accounts to be frozen or even wiped out because of bank mismanagement for which the depositor is not responsible, whether that depositor is a consumer or a business/employer who may not even have FDIC insurance. Imagine the problems if any major employer or even a state or local government had its payroll account frozen. Florida school districts had an analogous problem with its pension fund administered at the state level. Such protection is the legitimate purpose of the "bailout." However, we cannot permit losses to stockholders or to responsible management to be covered, nor can we permit the government to end up with enduring ownership of banks to be used as a political piggybank in the future. The taxpayers cannot bail out everyone who paid too much or who lent too much. I understand the concern about 1 official having power with no oversight, but this "bailout" is expensive enough without adding what the Senate Democrats want. The limited purpose should be to protect depositors and other parties who are truly innocent from a chain reaction panic.

I feel like we are bailing out a group of greedy rich people. With the CEO's salaries of AIG and others in the tens of millions and my salary in the thousands where is the justice in taxing me and they get a free ride. They need to take responsibility for their own bailout. I don't see how this tremendous debt will be paid back with people still losing their jobs, gas prices being sky high and foreclosures increasing by the day.

I am greatly opposed to any legislation that bails out financial institutions in such a manner as is currently being proposed. This legislation has all the earmarks of being the greatest financial scam ever to be perpetuated on the American taxpayer. First and foremost, there has been no disclosusre or accounting of the losses and especially the underlying assets which comprise this "crisis." Very little mention of the underlying asset which is a house which has inherent value as a home is being considered. Instead all we hear about is the losses in mortgage backed securities which have been hedged by arcane financial instruments known as credit default swaps. My guess is the losses in these swaps is the true culprit. From an accounting perspective, it is entirely possible that if the underlying asset, the house, if appraised using "a fair market value" versus the approach known as "mark to the market' would reduce paper losses and restore capital accounts to manageable levels which would reduce the crisis to one of liquidity instead of the current fearmongering of calling this an economic crisis. Since I am required to guess if this is possible then this means that there is no transparency in this market let alone any disclosure. Without this transparency and disclosure, the taxpayer is being used by so called "experts" to reward their bad behavior. True political leadership versus going along to get along is at stake. Outrage by the American taxpayer should be the result of hearing about the plans currently being touted. I certainly hope they are. Ralph

the "analysts and pundits" between 1929 and 1933 kept shouting "the sky is not falling". Oops! Fast forward to today with the "fundamentals are strong". Oops! When someone owes you 11 trillion dollars you can weather any storm. When you owe someone (Chinese, Russians, Saudis, Japanese) 11 trillion dollars and growing at 2 billion dollars every 24 hours the storm is much more dangerous, the fundamentals are NOT strong. We will learn to live within our means even if it means parking the aircraft carriers and taxing the rich. Oops! You may want to reduce your $$$$ cash assets.

The Federal Reserve doe NOT have the cash on hand to pay for this new BAIL OUT. They will use FIAT dollars made from thin air It will cause inflation, maybe a LOT of inflation.....

Any financial advisor worth his salt will advise any client to sit tight and not sell until this situation stabilizes. BUT,I upon reaching the age of 70 1/2 this year MUST BY LAW sell at a loss, because of the MRD clause in the IRA law. This law must be temporarily suspended until the financial markets settle.

I have been asked many times "You are a CPA, how is it that you have not bought a house?" I have been a CPA for 45 years, and I find it hard to Pay $800,000 for a house that 25 years ago I would not pay $40,000 for. In 1976 I sold my home for $110,000 and 30 years later a similar model (with smaller lot and no view) was selling for $1,250,000. So now I hear the real estate in the Los Angeles has a BIG DROP... you mean that home is now only $1,000,000?!!! Why don't you tell people how many of those defaults are 120% loans that never should have been made in the first place! Now how about those poor home builders - who broke with tradition and worked on 50% profits. Several of my friends sold their over-priced homes in the San Fernando Valley for $600,000, moved to the Dallas suberubs and purchased a brand new 3 bedroom home for $150,000. Do appliances cost 4 times as much in Los Angeles? Take a look at the Daily News in the San Fernando Valley over the past year... each month they proclaimed "the median price of a home is up $20,000, month after month, that was insanity but why not? Lenders don't hold people liable on foreclosures, didn't require a down payment and if you can make $20 to 60,000 in 6 months with no money down why not do it? Homes in Green Valley, Nevada doubled in 1 1/2 years, so they came down 20 to 30%, is that a crises? Businesses are not in a crisis only the greedy naked short sellers who have pushed the market to such lows only to buy the stock back at bargain prices having chased the small guys out of the market. Also if congress really wants to help the little guy why is the 70 year old limit on capital loss of $3,000 still aroung? That is a CPA"s point of view. Thank you, Jerry Zeldes, CPA

IF YOU WANT TO GO BACK TO WERE THIS ECONOMICAL DOWN FALL STARTED...START FIRST WITH THE BUYERS OF PROPERTY. THOSE THAT WENT OUT AND GOT A SECOND/ THIRD HOUSE WHICH WAS NOT THEIR PRIMARY RESIDENCE..BUT A HOUSE FOR SPECULATION...MONTARY GAIN. WITH PEOPLE BUYING MORE THAN THEY CAN EFFORD. O YES, THERE WAS PLENTY OF HELP ALONG THE WAY. TAKE COUNTRYWIDE, COUNTRYWIDE LOANS...THIS COMPANY HAD NOTHING TO LOOSE AND MONEY TO GAIN BY LOANING THEN BUNDLEING LOANS UP AND SALING THE LOANS. COUNTRYWIDE INCENTIVE WAS MONEY AND NO HAD LAWFUL RESPONSIBLITY TO LOAN..THAT IS SECOND ON MY THE LIST. WE WANT SOMEONE ELSE TO BLAME......LETS START WITH 435 CONGRESSMAN/WOMAN AND 100 SENTORS. THEY ALL OWN SOME OF THIS. SO LESS MOVE ON FROM BLAME GAME. PLENTY OF BLAME TO GO AROUND..BUT GREED AND BEING BLINDED BY A EASY DOLLAR MADE FOR PEOPLE NOT USING THEIR GRAY MATTER. SO WHAT NEEDS TO BE DONE? OBAMA IS PLAYINHG POLITIICS WITH THIS ISSUE AND HAS KNOW ANSWERS. O YES, OBAMA WILL COME OUT WITH SOMETHING BUT HE HAS NO IDEA WHAT TO DO. OBAMA HAS KNOW HISTORY OF DOING ANYTHING. NOTHING. SIDE NOTE....WITH ALL THIS OBAMA WANTS TO TAX AMERICANS AND..SEND $845 BILLION DOLLORS TO POOR COUNTRY THROUGH THE UNITED NATIONS TO POOR NATIONS. OBAMA'S ADVISOR WANT ALSO TO HAVE AN ON GOING 0.7% OF UNITED STATED GDP GOING THROUGH THE UNITED NATIONS TO HELP POVERTY IN POOR COUNTRIES. OBAMA SAID IN HIS GERMAN SPEECH HE IS A CITIZEN OF THE WORLD. HE CAME HOME FROM EUROPE AND WENT TO WASHINGTON D C AND SAID THE WORLD IS WAITING FOR US....OBAMA IF THAT IS YOUR ANSWER, WELL THE PEOPLE OF AMERICA NEED AN AMERICAN FOR PRESIDENT AND NOT A CITIZEN OF THE WORLD FOR OUR PRESIDENT. SINCERELY, JIMMIE W BECK

The point of "mark to market" is to permit the investor to know what he or she is buying. Transparency is important. However, one might consider regulation that would not use the "mark to market" numbers dealing with banks' capital unless it were clear that the declines in value are permanent. For depositors' and counterparties' sake, we cannot just close a large bank based on a snapshot in time of panic. Some time period -- perhaps 1 year -- should elapse before such a bank is required to raise capital based on a decline in its collateralized assets.

How does the bail out help the little guy. How does it help the tax payers by transferring the losses from bankers and mortgage companies to the federal government. How and by whom will the government get their money back. As I see it, the bail out helps large corporations, wealthy wall street investers, but not the little guy. Also, where and from whom will the money come from to pay back the government and how will this be done. The little guy is left holding the bag, an empty bag. EXTRA, EXTRA This will not stop the greed and it will not stop builders from building more homes that people cannot afford to buy.

The millions paid to the CEO's should be recovered. We should not pay for millions to go to people that did not perform. Enough is Enough. People will begin to rebel if this is not corrected.

I worked in business management for over 30 years. I have never thought a company should assume unreasonable risk just to show good results for stockholders, analysts, investment bankers, etc. Don't tell me I never worked through tough time like this - I was a CFO in banking during the hyper-inflation of the Carter years and the subsequent turn around. If I were a CFO again (I am not any more), and let my company get in such serious trouble to need a bailout from taxpayers, I would apologize, step down, and allow someone else to try to do it right. I want those who caused this mess to either fix it or do exactly that. I call on congress for this condition in the "bailout" funded by all of us --- Any company who participates in this new program must irrevokably dismiss its Chairman and CEO, who can no longer work at the company, and name a new board and senior officers to be voted by stockholders. I'm sure the good-ol-boy network will find most of them new jobs, but there might be some new incentives attached to a new deal.

Initially I took offense to the opening sentence in your article....the nations (wisest) economists,legislators, and politicians...After checking the definition of the word wise I realized the word has many meanings eg shrewd,calculating,cunning,crafty and sly.It then became obvious to me that what you really meant to say was...the nations cunning and most crafty economists,legislators,and politicians...I enjoy your articles,keep up the good work,and yes I agree that those responsible for these bailouts are Cons,very few Pros amongst them.

I can't help but wonder the possible long term impact this bailout may have on taxpayers. 700 billion dollars is an extreme amount of money and is really letting a decade of poor lending habits and mostly homogenous investments via crazy mortgages by financial institutions off the hook. It seems that we have been in a frightening pattern of short-term fixes by the government without regard to our long-term financial future. How many people are really looking past the hands in front of them? I can't put my thumb on it, but something tells me that this all-out bail out is a very foolish decision in the long run.

Alexis I took the Friday off and I followed this story. In fact I followed since late Thursday night. Since federal bailouts have limitations; this one is a completely new creature. All afternoon I've been thinking of the new ad hoc beurocrasy that Paulson and Bernanke have in mind to aquire these bad toxic mortgages. Last night Glen Beck pointed out the fact that the feds are broke. Debt owned by forigeners. Despite all of that I've been focused on this new entity. Paticurly how is it going to work. Now one investment analysist on Nloomberg just this afternoon called it FDR New Deal2. A sequel. But I can't help but wonder which polititians Democrats and Republican got fat off Wall Street either. Now with this new entity will homeownwers get thier homes back? that human side of the equastion needs to be look at. For foreclosed families aren't statics. That should be explored too as a news special becouse of those who have been victims of bad loans.

Alexis, this is right on target However, the underling MASSIVE DEBT at Federal, state, city, coporate and personal debt levels have been rising at an average rate of about 9% a year since 1980. The GDP growth has averaged about 3.65%. This was going to be a train wreck at some point. The debt levels are unsustainable now and are UNWINDING now through the financial system please research the term "the Great Unwinding" and find out what I mean, this is happening now throughtout the the world....

Initially I took offense to the opening sentence in your article...the nations wisest economists,legislators and politicians...After checking the definition of the word (wise) I realized the word has many meanings eg.shrewd, calculating,cunning,crafty,sly.It then became obvious to me that what you really meant to say was ....the nations shrewd and most crafty economist, legislators, and politicians were meeting,but you were too polite.I know, I know, these people have feelings too but I,m sure they,ll get over it.I enjoy your articles,keep up the good work.In closing I would say that I do agree that most of those responsible for these bailouts are Cons,very few Pros amongst them.

The cons conned us all,never mind bailout, letting them out on bail would be outrageous.