A Ledgie wants to know: Economy Edition

[HejiraNYC]

Originally Posted by strandinthewind

How exactly was Bear Stearns bailed out? The company was worth tens of billions of dollars and got sold for $262 million. Their office tower on Madison was worth $1.3 billion, not to mention the other viable assets of the firm. So, Bear Stearns was most certainly not bailed out. Rather the sale to JP Morgan was a fire sale that stopped a run on a bank. JP Morgan will make billions off of this. Hopefully, they structured it so that the $30 billion or so in Fed backing for the mtg. securities will have to be repaid is they turn out to be good, which is unlikely.

True, Bear Stearns is history. However, the House of Cards/ponzi scheme was bailed out with government money, and JP Morgan Chase just happened to be the one and only company willing to stand up and take on this catastrophe with the help of taxpayer money. And about this so-called 30 billion-dollar "loan," do you honestly think that it will ever get paid back?

But, your point is interesting and, quite frankly, very conservative. You are endorsing a free maket with no govt. interderence, which is the best method or correcting the market, though it also is the harshest. It is the harshest because it provides no stability to the markets and corrections turn into panics. So, some govt. interference is required IMO.

Yes and no. We need an open market; however it needs to be tightly regulated, to the point where disasters like this would be prevented. But what's galling about all of this is the way Wall Streeters were such open market capitalists on the way up, but suddenly have become socialists on the way down. They are indeed having their cake and eating it too. Not only should Wall Street take on a big giant IOU for all of this, the Federal Bank should fall completely under the control the U.S. government (contrary to popular belief, it is indeed a private organization with Wall Street insiders on their board). As for the markets, I think they should correct without government intervention, even if it means they crash. If the government intervenes in bad times, doesn't it also mean that the government and taxpayers should share in the profits during the good times too? One or the other, folks!

Interestingly, one of the primary reasons NOLA is not rebuilt is the people there are arguing about what to do. There are big plans to redo many neighborhoods, but the homeowners, city, state, and Feds cannot agree on issues of property rights. I will say this though - much progress has happened, though much remains to be done.

True, however, with the proper funding and leadership, NOLA would be much further along today. In any case the bottom line is that leadership, money and resources were focused on waging a losing war (based on lies and greed) in Iraq while people were dying unnecessarily and/or living in Third World conditions in our own country. What would Jesus have done?

[strandinthewind]

Originally Posted by HejiraNYC

. . . True, however, with the proper funding and leadership, NOLA would be much further along today . . . .

The trouble is you are dealing for the most part with individual property rights, which the govt. cannot without good cause take away. It is very hard to tell someone (rich or poor) that they can no longer live in the house they inherited from their parents and they have to move ten miles away to where it is safer.

Personally, I think the Fed. Govt. should have just passed a bill, paid these people the fair market value for their land in areas like the Ninth Ward, which always floods, and have been done with it. Let them go buy houses in safer areas or leave the city. Then, take that area and make it into a spillway. To me, that is the only viable solution. But, that is political suicide and in many ways an awful thing to do to someone.

[strandinthewind]

Originally Posted by HejiraNYC

. . . And about this so-called 30 billion-dollar "loan," do you honestly think that it will ever get paid back? . . . .

I do not think it is a loan. I think the Fed backed the obviously troubled debt. So, if that debt does what they think it will and goes bad (if it is not already there) JP Morgan is not responsible. So, the Fed is only on the hook to absorb the losses. If the losses do not happen, which appears to be unlikely, then JP Morgan gains an asset. So, I think my use of the word "loan" was a mistake. I could be wrong though. The deal appears quite complicated and the entire then is not out yet, but likely will be if Bear Stearns accepts the deal, which it may not BTW.

[HejiraNYC]

Originally Posted by strandinthewind

I do not think it is a loan. I think the Fed backed the obviously troubled debt. So, if that debt does what they think it will and goes bad (if it is not already there) JP Morgan is not responsible. So, the Fed is only on the hook to absorb the losses. If the losses do not happen, which appears to be unlikely, then JP Morgan gains an asset. So, I think my use of the word "loan" was a mistake. I could be wrong though. The deal appears quite complicated and the entire then is not out yet, but likely will be if Bear Stearns accepts the deal, which it may not BTW.

Oh, it is definitely considered a "loan," on top of the $200 billion "loan" pumped into the Fed last week. And this is on top of the billions already "loaned" to Wall Street over the past six months. But then again, I don't know where all of this money goes or how it is "packaged" and sold off. It just seems like monetary supply is always growing bigger and bigger, and that any financial problems are simply inflated away these days.

[strandinthewind]

Originally Posted by HejiraNYC

. . . doesn't it also mean that the government and taxpayers should share in the profits during the good times too? One or the other, folks . . . .

Well, it does. Look at that tax base article I posted earlier. When times are good, the various govt.'s make tons of money as well

[HejiraNYC]

Originally Posted by strandinthewind

Well, it does. Look at that tax base article I posted earlier. When times are good, the various govt.'s make tons of money as well

But tax revenue is collected no matter what. From everybody. So does that mean if I was reckless with my money and bought millions of dollars worth of dot-com stocks in the late 1990's, that I am entitled to a government-sponsored bailout because I paid my taxes?

[strandinthewind]

Originally Posted by HejiraNYC

But tax revenue is collected no matter what. From everybody. So does that mean if I was reckless with my money and bought millions of dollars worth of dot-com stocks in the late 1990's, that I am entitled to a government-sponsored bailout because I paid my taxes?

Well, no. When times are good, there is way more tax to collect and the huge rev. generated by companies like Bear Stearns pays or generates much of it, which is what that article said.

And - the govt. sadly will never or rarely will help out individual people, though it did in the Bear Stearns instance because if that company went broke, the run on banks would have been devastating.

But, I agree, the govt. helps out corps in a way that is awful. I mean look at your phone bill. In Georgia and I suspect elsewhere because it is a Fed Tax, we pay something like $5.00 per phone line to subsidize AT&T's cost for providing phone lines to rural areas That is an INSANE govt. handout. Why the hell shouldn't AT&T, a private but regulated entity, revise the national average price per line and absorb the cost themselves instead of getting arguably BILLIONS a year if not month in that subsidy.

[HejiraNYC]

Originally Posted by strandinthewind

the run on banks would have been devastating.

Hmmm... you mean like the 1980's S&L Scandal involving Jeb, Neil and GW BUSH?

[strandinthewind]

Originally Posted by HejiraNYC

Hmmm... you mean like the 1980's S&L Scandal involving Jeb, Neil and GW BUSH?

It wasn't just them and I suggest it started brewing in the 70's.

In the end, some, but certainly not all, corps are always trying to get away with something. Remember the check kiting scheme EF Hutton did I think that the Bear Stearns big wigs likely will be prosecuted. However, we need to see the books to determine that. Even if they did nothing illegal regarding the trading of the AAA bonds, if they consistently lied while diluting their own shares, they likely will go to jail as many others have in the past.