[Danny]

I was pretty surprised to hear this morning that the bailout bill failed in the House. I was even more surprised to learn that the vote was split down party lines, with most Democrats voting for it and most Republicans voting against it. Bush is saying that he is disappointed in the outcome of the vote, but it's his own party that rejected the bill. What the heck is going on?

All the arguments I've been seeing against the bailout basically consist of, "These companies made bad decisions and deserve to go down for it, let them fail." The fact is, in this case, I really don't give a crap who deserves what or whether justice is being served on stupid and predatory companies.

What I want to know is this: What are the consequences of doing nothing? The consensus seems to be depression, but I'd like to hear some arguments from both sides regarding this. Can the market "fix itself" if Congress doesn't act, or are we really looking at sheer turmoil as a result of this meltdown?

Secondly, are the folks who voted against the bailout proposing any alternative solutions? What are their arguments for rejecting the bailout, and what are they proposing instead?

I honestly don't know what to think. I've been following the news and - I'll be honest - I'm terrified, but I still have no idea whether or not I should be in favor of a bailout plan. This is the first major event in years where I've just say by biting my nails and hoping that our leaders have the wisdom to make the right decision, because I sure as hell don't know what the "right decision is." I really don't want this discussion to turn ideological - I really don't care if you don't like the idea of taxpayers forking over $700 billion dollars to bail out big corporations collapsing as a result of their own poor decision making. Trust me, I don't like it either, but at this point I don't care. I want to know 1) what will happen if a bailout plan is executed, 2) what will happen if we do nothing, and 3) are there any alternative solutions?

[JerryLove]

If we spend the money:

We pass a trillion dollars of "bad debt" to our kids.
We devalue the dollar which means inflation, particularly in energy costs.
We prop-up the companies whose bad-business practices got us here (and that's not just a moral argument, why would they change their practices when they made lots of money and avoided the perils?)
We become the bad part of socialist (ownership of business).
We continue to propup artifically inflated home values.

Maybe, just maybe, we avoid a freeze in the money-markets market that might not occur anyway, and which might, even if it did happen, be replaced with lines of credit, in doing so stop a debt-for-debt's-sake economic system from failing.

Or it might break anyway. Remember, this solution comes from the same people who two months ago said this problem didn't exist.

[Simo]

There is a lot on the news over here about what is happening in the States.

Our share market is expected to tumble today following on from the decision not to pass the bill.

Most analyists believe however, that we will avoid any recesion because we are far enough removed from the US markets. There were even reports over here that some people around the world were saying that other countries should put in and buy the US's bad debt.

On a side-note, i have never fully understood your systme of government. Ours seems so much easier.

[tht00]

Originally Posted by Danny

I was pretty surprised to hear this morning that the bailout bill failed in the House. I was even more surprised to learn that the vote was split down party lines, with most Democrats voting for it and most Republicans voting against it. Bush is saying that he is disappointed in the outcome of the vote, but it's his own party that rejected the bill. What the heck is going on?

All the arguments I've been seeing against the bailout basically consist of, "These companies made bad decisions and deserve to go down for it, let them fail." The fact is, in this case, I really don't give a crap who deserves what or whether justice is being served on stupid and predatory companies.

What I want to know is this: What are the consequences of doing nothing? The consensus seems to be depression, but I'd like to hear some arguments from both sides regarding this. Can the market "fix itself" if Congress doesn't act, or are we really looking at sheer turmoil as a result of this meltdown?

Secondly, are the folks who voted against the bailout proposing any alternative solutions? What are their arguments for rejecting the bailout, and what are they proposing instead?

I honestly don't know what to think. I've been following the news and - I'll be honest - I'm terrified, but I still have no idea whether or not I should be in favor of a bailout plan. This is the first major event in years where I've just say by biting my nails and hoping that our leaders have the wisdom to make the right decision, because I sure as hell don't know what the "right decision is." I really don't want this discussion to turn ideological - I really don't care if you don't like the idea of taxpayers forking over $700 billion dollars to bail out big corporations collapsing as a result of their own poor decision making. Trust me, I don't like it either, but at this point I don't care. I want to know 1) what will happen if a bailout plan is executed, 2) what will happen if we do nothing, and 3) are there any alternative solutions?

The market crashed because of a combination of bad government and corporations in the first place -- the bailout isn't a fix of the problem, but a perpetuation of the problem. You can put a band-aid on a dam leak, but it'll only delay an inevitable and catastrophic failure.

Ron Paul's response:
http://www.campaignforliberty.com/blog/?p=616

Similar information, but in interview (video) format:
http://www.youtube.com/watch?v=sZwPkTmqfpg



Even if you don't agree with Ron Paul's solutions, he predicted this exact problem back in 2002:

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges of Fannie, Freddie, and HLBB have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

However, despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policies of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to the GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.

Mr. Speaker, it is time for Congress to act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors misled by foolish government interference in the market. I therefore hope my colleagues will stand up for American taxpayers and investors by cosponsoring the Free Housing Market Enhancement Act.
http://www.house.gov/paul/congrec/co...2/cr071602.htm

[Chrysostom]

Originally Posted by Danny

All the arguments I've been seeing against the bailout basically consist of, "These companies made bad decisions and deserve to go down for it, let them fail." The fact is, in this case, I really don't give a crap who deserves what or whether justice is being served on stupid and predatory companies.

What I want to know is this: What are the consequences of doing nothing? The consensus seems to be depression, but I'd like to hear some arguments from both sides regarding this. Can the market "fix itself" if Congress doesn't act, or are we really looking at sheer turmoil as a result of this meltdown?

I doubt that the market can "fix itself" entirely, because such a large part of the cause of the problems is government intervention. E.g., "If we do nothing this many Americans cannot own homes. If we provide these bad loans, all Americans can." Non-market problems don't get fixed by the market nearly as easily as market problems do.

Originally Posted by Danny

Secondly, are the folks who voted against the bailout proposing any alternative solutions? What are their arguments for rejecting the bailout, and what are they proposing instead?

This is the second major bailout plan so far, and there are plenty of others. Here is something that just happened, for instance.

I haven't so far read any economist who thought this plan was a really good one. (Although they don't hate it nearly as much as the first.)

Originally Posted by Danny

I honestly don't know what to think. I've been following the news and - I'll be honest - I'm terrified, but I still have no idea whether or not I should be in favor of a bailout plan.

The whole purpose of the news is to terrify you. Never, for any reason, believe it.

Originally Posted by Danny

This is the first major event in years where I've just say by biting my nails and hoping that our leaders have the wisdom to make the right decision, because I sure as hell don't know what the "right decision is." I really don't want this discussion to turn ideological - I really don't care if you don't like the idea of taxpayers forking over $700 billion dollars to bail out big corporations collapsing as a result of their own poor decision making. Trust me, I don't like it either, but at this point I don't care. I want to know 1) what will happen if a bailout plan is executed, 2) what will happen if we do nothing, and 3) are there any alternative solutions?

People were also scared as **** about terrorism so the US "did something" -- go into Iraq. That hasn't proven to have long-term popularity.

[Ryan Freeland]

The U.S. market as a whole lost $1.4 trillion in value today... twice as much as the price of the theoretical bailout. How does that happen?

[S.B.Nichols]

Originally Posted by Danny

Secondly, are the folks who voted against the bailout proposing any alternative solutions? What are their arguments for rejecting the bailout, and what are they proposing instead?

Most rejected it because they, and their constituents, have absolutely no idea what they were voting on. The dems controlling the house basically said "lets vote on this package we put together that you haven't seen yet."

Here is the representative from the district next to mine...
http://ca.youtube.com/watch?v=l7B4laX1E70

[Chrysostom]

Originally Posted by Simo

There is a lot on the news over here about what is happening in the States.

Our share market is expected to tumble today following on from the decision not to pass the bill.

Most analyists believe however, that we will avoid any recesion because we are far enough removed from the US markets. There were even reports over here that some people around the world were saying that other countries should put in and buy the US's bad debt.

On a side-note, i have never fully understood your systme of government. Ours seems so much easier.

What in particular are you wanting to understand? I'm sure there are plenty of people on here who could help explain.

The country is broken up into federal, state, county, and local civil authorities. Federal is presumably the one you're most interested in.

There are three parts:
1. Executive branch -- This is mostly the President, plus some other institutions designed to enforce laws. The President can veto a law -- meaning that he can strike down a law that was already passed -- but an overwhelming majority can overcome that veto. The President also has the power to appoint people to certain offices. S/he is elected by a vote of the electoral college.
- The electoral college is composed of delegates who represent a particular state. They vote as a block according to how the people of that state vote; so, if there are 55 delegates from California and 51% of Californians vote for Obama, Obama gets all 55 votes. A state gets a number of delegates equal to its member of Congress, House plus Senate. (This means that smaller states get more votes per person, as you'll see later.)

2. Legislative branch -- This is the Congress, which writes and passes laws. It has two parts, the House of Representatives and the Senate. There are many more members of the House (435?) than the Senate (100). Members of the House are proportional to state population, but each state gets two senators. This balances the power between big and small states. A law must be approved by both parts of Congress (called "chambers") in the same form to be passed.

3. Judicial branch -- This is the courts, which interpret the law. The Supreme Court is the highest and best-known court, but there are several other high-ranking courts that are significant. A case can only get to the Supreme Court by starting at a low-ranking court and working its way up to the Supreme Court.

Let me know what other questions you have.

[Chrysostom]

Originally Posted by Ryan Freeland

The U.S. market as a whole lost $1.4 trillion in value today... twice as much as the price of the theoretical bailout. How does that happen?

What do you mean? (Or was this a rhetorical question?)

More people sell than buy is the simple answer.

[Ryan Freeland]

Originally Posted by Chrysostom

What do you mean? (Or was this a rhetorical question?)

More people sell than buy is the simple answer.

Yes, it was rhetorical.

It's just interesting that the speculation/failure of passage for that bill cost the economy twice as much as the actual bill would have...

[Chrysostom]

In the short term.

Also, government tax dollars aren't the same as stock value.

[doulos14]

The problem is not with the money, but the people who spend it. these mortgage companies have continued to make these loans so that they can earn money off of them even at the cost of the American people. Now if we were to put some limits on the loaning of money and where the money goes (to politicians, you know it's true) then we might be able to make progress.

[H.M. Murdock]

Meh. I'm pretty happy about it, to be honest. While I'm not a laissez faire advocate in any way, I don't think that companies with bad practices should be bailed out by the government. I do think the market can fix itself, but not without some help/incentive from the government.

The problem is not with the money, but the people who spend it. these mortgage companies have continued to make these loans so that they can earn money off of them even at the cost of the American people. Now if we were to put some limits on the loaning of money and where the money goes (to politicians, you know it's true) then we might be able to make progress.

Getting money is already pretty difficult, dude, at least where I live. A lot of it may lie in the fact that they don't give out enough money, at least not to the right people. And when they do, interest is outrageous- on a $180,000 house in my area, the interest comes out in such a way that the homeowner doesn't pay more than $120/month on the actual value of the house until the second or third year of the mortgage, but still have to make $1,000/month or so payments.

If the market is reworked (legally/by legislators) in the greater interests of the collective, and banks are allowed to pick up mortgages in their area, a lot of things could potentially settle down, and other banks will acquire enough growth at a manageable rate to replace the ones that have toppled.

[Ax]

The bailout may be the worst thought through piece of "legislation" (i can think of much better words for it than 'legislation') in U.S. history, right up there with English being our "Common and Unifying" language.

Putting money into this would just increase our debt, which is way too large in the first place due to King George's War and other economic bunglings because a "Republican" can't control spending. (If you like I can give you a rant on 100 reasons George W. Bush is not a Republican)... After it increases our debt, it inflates the dollar to be worth mere pennies on the dollar of what it is today which is less than half of what it was this time last year... Gas would jump to over 9 dollars a gallon (that may be an exaggeration but probably not much of one), basic foods and living commodities doubling in price, and major layoffs and the U.S. not having enough money to payout for unemployment. This bill could put us in a worse depression than post-WWI Germany and that is one of the worst depressions in the history of the world.

Do you really want to look like this?:

Read up:http://en.wikipedia.org/wiki/Hyperinflation

That in the background is huge sacks of German paper money that became so inflated the conversion rate, IIRC was around 40,000 Mark per Dollar when the Mark, prewar, had been almost as strong as the Dollar. By today's standards it'd probably be upwards of a million marks per dollar.

Remember before you support a piece of legislation: 'who's idea was this?' In this case a man who said that job loss was a sign of "slow economic growth" and people who several months ago said there was no crisis. Can you really trust these people when they obviously don't know economics well enough to avert the crisis to begin with?

[Epaphras]

With so many in the House up for re-election in November, Republicans want to do everything they can do distance themselves from Bush, including voting against his bail-out plan. Which is a shame if it would have worked. Then they won't get re-elected because they failed to act!

I can't tell you why Democrats voted for it, though....