If No Bailout, What Should We Do?

You got it right, what is with so many other pundants screaming we must have the bailout?

If we are not going to let the market take care of itself and intervention is the bottom line then we should do 3 things and quit talking about a bailout. We should do the following. 1) Insure for the losses. A lot cheaper. We don't know that there will be these types of losses. The insurance will lower the risk and ease market concerns. 2) Fix the accounting rule, mark to market. Change it back to a rolling 3 yr average but with closer supervision from the regulators. 3) Cut capital gains.

Alexis, One thing that bothers me is that my family makes 300K a year, we owe 400K on our house pretty good, but average in So. Calif. We never took additional equity out, while people I know took out 1M in equity to buy more property. So we are in better shape than people who could not afford there house and others who took to much equity out to buy more propoert. If the rescue/bailout does not happen, what are we looking at clasping? 10% unemployeement? 10% interest rates? no one has said what specifics could happen. what will interest rates go to? what is the worst unemployment number? what other things could happen.

Lower interest rates to 5% or 5.5% so that people in homes with adjustable rates can refinance. Those that cannot, the banks get their house. If these loans are merely the only problem, then the problem will end within a year. I suspect that there is more to the problem than mortgages and that is why such a large sum of money is needed! Also, if main street is really affected like everyone says, then how come wall street never shared with us their profits when times were good,i.e. when paulson took 500million from goldman. Wher was the main street share? Thanks, Alexis for doing such agreat job reporting for us to make it somewhat understandable.

"How fortunate for leaders that men do not think." Adolf Hitler "The victor will never be asked if he told the truth." Adolf Hitler

Have the experts and the government been wrong before? Yes they have. The experts on your channel constantly make predictions that do not come true. This is not an exact science. This problem stems from loans that should not have been made. The magnitude of these loans created banking giants and institutions to handle the volume. These institutions have to fail for our economy to go forward. The institutions and their supporters want the government to take these toxic loans off their hands. We are back to the status quo. There has to be change. Without change there will be no improvement. Let the strong survive and the weak fail. I do not believe that the entire economic system will come to a girding halt. It seems that the loudest proponents of this package complain that they will only be able to loan to individuals with good credit. DUH You know it may be hard to accept the fact that we cannot fix everything. Maybe it is time to go back to a savings based society rather than a credit based society.

It is time to take out the garbage. It stinks. This mess was created on our watch. We must not pass it on to the next (several) generation(s). Liberty is worth more than all the money on Wall Street and all the pieces of paper with pictures of dead Presidents the Fed can print.

This all started with housing. It has not improved because there are so many people still willing to get into with both feet. In basic term, too much supply. This BILLout will not help the main street America. When Wall Street bankers get BILLout, they will only cause themselves more trouble in lending enough to boost the housing market. The top dog executives get to retire with their hundreds of millions of taxpayer's dollars. The best thing is to let the market take care of it. Let those that made bad decisions file bankrupty. Set BILLout to secure the actual Main Street America's deposits. It's John Adam's "Creative Destruction". It hurts for a little while. But what comes out is a more efficient system in the banking business system.

No Bailout? You can't argue with that terminology. Don't. It doesn't matter what you call it. NO RESCUE WITHOUT REGULATION and NO RESCUE WITHOUT REFORM!!! The government led the charge. US fiat currency is an IOU. The Federal Reserve Note is an instrument of debt. Smoot-Hawley. Glass-Steagal. Gramm-Leach-Bliley. Now, an aggregate of mortgages are bundled, mislabled a (SIC) "security", and the yield is based on a future that cannot be guaranteed. The risk is astronomical. The government allowed it. The government ignored it. The FDIC is corrupt. They didn't have enough money to make good on the deposits. So, instead of doing what they are supposed to do, they destroyed the capital investment of stock holders in Banks that they insured. That's my retirement--I'm a taxpayer also. Please stop saying that the FDIC is helping. You think the credit crunch is a problem. Wait to you see investment funds dry up. Bailout -- it's a bailout because we're being told that taxpayers have equity as provided in the amended paulson plan that didn't get passed, but that is being expressed by the same people who caused the problem, the same people who were asleep at the wheel. Nah, we don't care about that coming depression. Why don't we care? Because this bandaid bailout will have us right back in the same place. 3 years? 5 years? 10 years? Who knows, but it's a sure bet without regulation and reform.

This bill should NOT pass. I have lost over 30% of my 401k and understand that no bailout means I will lose more, but these are the consequences we must face when let greed dictate our actions. These companies, and hopefully the executives, should be allowed to fail. I have my own personal credit problems, I haven't been able to get a credit card, I can't even get a car my credit is so bad, I moved closer to my job and take the bus to work, I managed to survive without begging someone for help. This country is strong enough to get through this horrible crisis, we have faced tough challenges before but begging for a handout is not the answer, we as a Country are better than that. It will be tough for all Americans but we should look at this as a learning experience, we can not blame any person or any party. This was caused by the greed of America and that greed crosses party lines, that greed extends from the middle class to the rich. The only good thing that will come from this economic crisis is that most people will start living within their own means and not living off credit.

The housing market needs to have its rule change. Becouse speculators,appraisers and some bankers I believe are at the root of this problem. What needs to be changed is the FHA which every city goverment has to create affordable welfare housing. This market needs a real shift in behavior. Like if u take away the affordble housing model,force these local politicians to shift thier own behavior. Example the Mayor of Vicksburg believes that high end white middle class families are going to move here becouse he has affordable housing. That's not true. The FHA and other entites like it should be force to change with the forces of the marketplace. Rules should be in play where low incomers shouldn't be forced to deal high intrest rates. Not to mention some wealthy families too who bought their homes above thier budgets. Yet this depressed housing market,the root of this problem,needs to reexamine and evaulated. How does one shore up price,and load off unsold property inventories? One answer is an auction. Cut out some the middleman in real estate. Regulations within this market between appraisers and bankers need to be examine. Becouse of the banks have to offload bad debt and bad mortgages. Seriously this market needs to be evalvated,improved upon for everyone and last but not least the dollar needs to be strengthen once again.

I am not for the current bailout. I think if anything is done, it should be removing the mark to market rule and replacing it with a rolling average. I say let the banks who bet on those crazy loans they gave without requiring income documentation go broke. Another bank will step up and take their place. That's the beauty of capitalism. You take risks and you can be rewarded or fail. They were rewarded for years when the housing market was good, but now they are going to face to consequences of having a non-sensical lending policy. Also, we have overextended ourselves as a government, individuals and on the corporate level with easy credit. Maybe we need it to slow down to some extent so that we can get back in the black.

Remember those guys who were called nuts and isolationists? The Ross Perots and the Pat Buchanans, these guys were the only ones looking out for the middle class of this country. Our GDP is not very strong and is the most important number in our ecomonic well being. We can't all go around and service each other if we have no manufacturing base left. Our GDP has been given away. When greed is allowed to rape your GDP, your ecomomy will shrivel. Of course it doesn't matter to the extremely wealthy, they can just go and live elsewhere, in the new country with the growing GDP.

Alexis, Thank you for this blog and thank you for your excellent reporting. I understand the need for government intervention for the credit crisis. I also understand that when you severely cut yourself and need stitches you do not treat the injury with a band aid. In my amateurish opinion the bill that was voted on in congress yesterday did little to fix the problem. It seems to me they are trying to put a bunch of Band-Aids on the problem when stitches are needed. Here is what I saw that was wrong with the bill that was defeated in Congress yesterday. I did not see anything in it that would stop Banks and mortgage lenders like Fanny May from continuing to make bad loans. Also, it did little to address the accounting practices such as mark to market accounting. Oversight seemed to be in this bill but how such oversight would work was a mystery. I think these issues could easily be addressed. The government could make a temporary rule on Banks and Mortgage companies that no home loans unless the buyer can put down twenty percent. That is just one idea. But if this is not addressed now it is doubtful that congress will have the guts to address the problem later. Then we will be facing the same problems again. Also I find it disgusting that politicians are pointing fingers at each other instead of dealing directly with the problem. They seem to be all about talking points and political clichés. It would have been nice to have seen our politicians after the bill was defeated to walk to the microphones and have said the following; “Obviously we have not come up with a solution to the credit crisis that we all can agree upon. So we are all going to meet and negotiate to get a better plan for the American people.” They did not say that, they just pointed fingers and many left for the Jewish holiday. Which leaves me scratching my head ,wondering if this is such a crisis why did congress not meet today. Finally, I am sick and tired of being told that this is the fault of Wall Street. Just about every American is to blame. Many of us have saved little and have high credit card debt. Many of us live from pay check to pay check because we want instant gratification and will go out and buy that big screen TV instead of saving for a rainy day. When problems come we blame everyone but ourselves. Most of us do not understand economics and so we blame the fat cats on Wall Street for all our problems. Wall Street, Main Street and the government have also had their hand in creating this problem. Until we all admit our mistakes and take actions to correct things, it will only get worse. Hope this all makes sense. Again, thank you for your reporting. I am slowly learning the world of finance. Something that I truly believe needs to be taught better in our public schools. Craig L. Getchius

Alexis, Give Dave Ramsey a call. He'll explain it all to you. I don't know what should be done but I can tell you that giving $700 billion to a bunch of self-serving, lying, cheating, greedy, pompous windbags who caused the problem is not it. These crooks just passed a Continuing resolution with billions and billions of earmarks. Yeah, let's trust them to put the peoples' interest first.

Instead of coporate welfare... The Common Sense Fix (from Dave Ramsey's Website) Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three step Common Sense Plan. I. INSURANCE a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity. b. In order for a company to accept the government-backed insurance, they must do two things: 1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage. a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes. b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives. 2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs. c. This backstop will cost less than $50 billion—a small fraction of the current proposal. II. MARK TO MARKET a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate. b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing. III. CAPITAL GAINS TAX a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing. b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.

In all of this there is not one word regarding a major cause. When are we going to hear of the resurection of Glass-Steagall? Force banks to be banks again. Here is my two cents. Set up a temporary RTC like vehicle and then say to any financial institution that is in trouble "Just give us your bad performing junk at no cost. We will then sell it and the profit goes into the Treasury. Meanwhile you can simply cross it off of your books. And if you get in trouble again---Goodbye. Ken Kesler

Gee allot fo people are saying don't sell stick it out. When they start paying your bills and mortgage you should stick, but, they are sounding like Key Lay of Enron don't sell the stock is fine. But if you are having problems with paying your mortgage and rading your retirement fund is the last resort. then folks tune out the financial talking heads because if yyou don't have a home where will you retire? The Problem is too many businesses start up and then get bought out by some other big company, and, then they start anohter business again and do the same thing. Its the in thing to do with Wall street morons today. Also the people who buy stock one min and then sell it another min are more fools that ruin the market. and of course the Big Morons who got $500,000 dollar homes and they make only 30-40 thousand a year hello you fools took the loans knowing that you probally won't be able to pay it now you deserve to lose it. I wish allot of people would step up and take responbility for the problems. Hey I did not forget the over paid CEO's with those golden parachutes they drive companies into the ground and leave with allot of money. Too many companies worry about their stock price instead of the products they make. Also people worry about their credit ratings instead of their families. There is allot of blame to go around which just see who stands up and admits it. But remember folks its your money not the TV financial talking heads.

Alexis: I have watched multiple shows, including yours, which try to explain this crisis and what we should do about it. Personally, I'm tired of the rhetoric (not from FBN of course!) and am leaning in the direction that many economists are in agreement - let them go bankrupt, a better model, a better company, will take its place. I stand to lose a lot if the market heads down much more but I'll be losing either way. I probably sound a lot like the rest of the people you've heard from. I survived the oil industry collapse in the early 80's and the dotcom bubble bursting. I've survived bad real estate markets where I've lost money. Not one governmental agency was there to help make up the loss. I'm prepared to go through another challenging time. Not only will I be better off long term but I believe the country will be too.

The free-market can handle itself, these banks need to go bankrupt to liquidate their assets. It's ridiculous to try and pin their bad investments on us. We've been having economic troubles long before wall-street dug itself a deep hole. The 700 Billion Dollar bailout is not constitutional and should not be accepted in ANY way or form. We don't need to do anything but investigate these companies and wait for them to go bankrupt. When big business falls there will be smaller businesses who have been aching for the chance to make their name. This is called ebb and flow. It's how sound economics work. What goes up must come down.

Also, the Federal Reserve needs to be abolished. Inflation is on the rise and the USD is going to be worthless soon enough if we don't put an end to it.

Buy stocks now, period.

First - suspend the mark to market rule. Second - eliminate the capital gains tax. Third - take the necessary measures to strengthen the dollar in the world market. Fourth - on Nov. 4th, go to the polls and vote for the opponent of anyone with "incumbent" by their name.

Well considering that $85^9 divided by $200^6 equals 425 bucks and not $425,000 I guess that "bailing out the taxpayer" idea comes up a bit short. Therefore I will side with "let the free market handle it". The efficient market will provide a better solution over time than anything our govt can belch forth. Those marvels in DC have such an amazing track record of getting things right as it is.

While I am against the bailout, I fully support introducing liquidity into our credit markets. Why not introduce capital into the credit market by lending it to regional banks who have demonstrated responsible lending practices to qualified borrowers instead of scooping up bad debt from irresponsible lenders and hoping they will make capital available again? Or, create a new lending institution with the proposed bailout funds and make loans available to qualified borrowers. Response to DJ Williams: Yes, that e-mail suggesting sending a check for $425,000 to all Americans over 18 years old has been circulating but the math is off. If you divide the $85 Billion by the 200 Million adults, you only come up with $425.00 per person, not $425,000.00.