What is it Really Going to Cost?

In 2005, for the first time in history, a serious Fannie and Freddie reform bill, S. 190, was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets. If that bill had become law, then the world today would be different. But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0



In support of S 190, also known as the Federal Housing Enterprise Regulatory Reform Act of 2005, John McCain said: "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay."

http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16

Federal Housing Enterprise Regulatory Reform Act of 2005 would have Amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Most importantly with regard to the CDS situation, S. 190 set forth operating, administrative, and regulatory provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting. Adoption of these regulatory provisions would have undoubtably affected the way CDSs were dealt with in "private" enterprises.
The bill would have also amended the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation., and transfered the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation. If this had been in place three years ago, this whole situation might have been averted.

http://www.govtrack.us/congress/bill.xpd?bill=s109-190&tab=summary

What it's going to cost is the collapse of the dollar and hyperinflation

The $700 billion bailout plan will result, very quickly, in the collapse of the dollar and hyperinflation.

The US economy does not have $700 billion in spare cash to buy up the $700 billion in Treasury notes that need to be issued to finance this bailout. If our economy did have that kind of surplus money, we would not be in this "liquidity crisis" that is locking up our financial system . We will need foreign investors to buy even more of our debt. But already a huge amount of our national debt and private debt is being held by foreigners, including sovereign governments like China. When the Federal Reserve prints up an additional $700 billion in money to be be sold as Treasury notes, the result is a significant devaluing of the dollar. (Consider, too, that the Bush administration is already running up a $400 BILLION budget deficit this year that needs to be financed, so that brings us up to $1.1 TRILLION for the year.) That means the dollars that foreign investors hold will be worth less. But foreign investors aren't stupid, they can see this coming. To protect themselves they will start selling off dollars before they get devalued. Once the dollar starts dropping, the decline will accelerate, as no one wants to be stuck with dollars as they spiral down. (This is what happened to stocks in financial companies recently, the downward trend scared investors and everyone starting bailing out.) When the dollar is going down, no one wants to be the "last man standing", the one still holding dollars that are now worth
a fraction of what they were after everyone else has dumped theirs. It's going to be "sell quick or
be left holding the bag." Thus, a collapse of the dollar.

With a collapsed dollar and the Fed still printing money to finance this $700 billion bailout, we end up with hyperinflation.

I totally agree with gizzy8z8. Why not solve the problem from the ground up and not reward the people and companies that caused the problem in the first place. I would love to be able to pay my debts, buy a house a car and know where my next meal is coming from. (I am a former classroom teacher with a master???s degree) due to chronic illness I am unable to work full time. This would help so many people in my and worse situations to have pride and feel useful in today???s money run society. By Paying off my debts the creditors will have more money to lend, by paying off my student loans more people will get financial aide. By buying a house, someone will be out from under a mortgage. Getting my finances caught up will allow me to mend my credit and borrow money from the companies that are still in business due to good practices and in the long run it will do more for the economy than putting a band aid on the issue to be ripped off later when it makes things worse. It is common sense that this will work. But, congress and big business will not go for it because it will take money out of their pockets and they would not be able to control what we spend it on which will drive them mad.

I am against the bailout of AIG. Instead, I'm in favor of giving 85 billion to America in a We Deserve it Dividend. To make math simple, lets assume there are 200,000,000 bonifide US Citizens 18+. Our population is about 301,000,000+/- counting every mn, woman and child. So 200,000,000 might be a far sta at adults 18 and up. So divide 200 million adults 18+ into 82 billion, that equals 425,000.00. My plan is to give that to every person 18+ as We Deserve It Dividend. Of course it would not be tax free so lets assume a tax rate at 30%. Every individual 18+ would pay 127,000.00 in taxes, thatsends 25,500,000,000 right back to Uncle Sam, but it means that every adult 18+ has 297,500.00 in their pocket. A husband and wife has 595,000.00. What would you do with that money in your family? Pay off your mortgage, housing crises solved..repay college loans, a great boost to new grads..Put away money for college, it'll be there..Save in a bank, create money to loan to entrepreneurs..Buy a new car, create jobs..invest in the market, capital drives growth..pay for your parents medical insurance, health care improves..Enable Deadbeat Dads to come clean or else..Remember this is for every adultUS Citizen 18+ includingthe folks who lost their jobs at Lehman Bros., and every other company that is cutting back. And of course, for those servg in our Armed Forces. If we're going to re-disribute wealth let's do it, instead of trickling out a puny $1,000.00 (vote buy) economic incentive that is being proposed by one of our candidates for President. If we're going to do an $85 billion bailout, let's bail out every Adult US Citizen 18+..As for AIG, liquidate it, sell of its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargin hunters cut it up and clean it out.. Here's my rational. We deserve it and AIG doesn't. Sure, it's a crazy idea that can never work. Maybe???? But can you imagine the Coast to Coast Block Party? How do you spell Economic Boom? I trust my fellow adult Americans to know how to to use 85 billion. We Deserve It Dividend...more than I d the geniuses at AIG or in Washington DC. And remember, this plan only costs 59.5 billion because 25.5 billion i returned instantly in taxes to Uncle Sam

I wonder if the bailout takes place what kind of bonus checks the politicians will be receiving? They should all give up those bonus checks to the poverty sticken people of the United States, they should all give up half of their pay checks to the American people. Why should we continue to pay for their lavish life style? They should all be made to live like the rest of us. Their silk suits, lavish lunches, million dollar homes, xpensive cars, etc. and live like they have forced us to live..I for one am tired of being their puppet on their strings..We as the American People should start fighting back. Not be afraid of them, they should be afraid of us and what we could do and not do. We have abided by their rules long enough. Why are so many Americans afraid to stand up and fight back? I have written every congressman, woman, senator, president, vice president, every elected official I can think of voicing my opnion, where it will get me? I have no idea, but I am letting them know how discusted I am with all of them and their scare tactics. I will continue to voice my opnion to them and let them know what they have done to us....We can't take it anymore...We are living in poverty and it has got to stop....

TARP BAILOUT THRILLER NIGHT (Final version)
(Michael Jackson's Thriller)
WilliamBanzai7

It's Midnight this late September night and the street is full of Politicians, Lurking in the Dark.
Under The Moonlight, You See A Sight That Almost Stops Your Heart.
You Try To Scream, But Terror Takes The Sound Before You Make It.
Debt Markets Start To Freeze, As Horror Looks You Right Between The Eyes,
Your Paralyzed

You Hear The Door Slam, And Realize There's Nowhere Left To Run.
You Feel The Cold Take Hold, And Wonder If You'll See the Mother of All Bear Runs
You Close Your Eyes, And Hope That This Is Just Imagination,
But All The While, You Hear The GOP Pachydermata Creepin' Up Behind
You're Out Of Time

They're Out to Get You, There's Demons Closing In On Every Side.
They Will Possess You, Unless You Change The Number On Your Skype.
Now Is the Time for You and Your Trading Quants to huddle Close Together
All Thru The Night, It'll Save You From The Terror On The Reuter Screen,
It'll Make You See:

(narrated by Vincent Price)
Darkness Falls Across The Land, The Asian Trading Day Is Close At Hand.
Bottom Feeders Crawl In Search Of Blood To Foreclose on Your Neighborhood
And Whosoever Shall Be Found Without The Soul For Economic Bust
Must Stand And Face The Hounds Of Subprime Hell, And Rot Inside WaMu's Bankrupt Shell.

The Foulest Stench Is In The Air The Funk Of 700 Billion Bailout Bucks
And Shortselling Ghouls From Every Trading Room Are Closing In To Seal Your Doom
And Though You Fight To Stay Alive Your Net Worth Starts To Shiver
For No Investing Mortal Can Resist The Evil Of The TARP Bailout Thriller

'Cause this Is Thriller, TARP Bailout make or break Night
and No-ones Gonna Save You from the Beast about to Strike.
You Know its Thriller, TARP Bailout Thriller Night
You're fighting for Your Monetary Life inside a Killer, Thriller.

Thriller, TARP Bailout Thriller Night
'Cause I can thrill you More Than Any Market Ghoul Could ever try. (Thriller, Bailout Night)
So Let Me Hold You Tight And Share A Killer, Chiller, Fiscal Massacre
Thriller Here Tonight.

'Cause this Is Thriller ,TARP Bailout Thriller night
It Will Thrill You More Than Any Ghoul Could ever dare try
Any Ghoul could ever Dare Try

(Daddy, can I be TARP for Halloween? No deary...its too scary! Be something funny
like the McCain campaign )

http://williambanzai7.blogspot.com/

TO NEWSWEEK FOLKS:
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Please take off the nasty and demeaning comments by
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Thanks a lot.

As Mr. Samulson states, "the whole idea of the bailout is to help banks and other financial institutions get rid of risky assets and replace them with cash that would encourage a resumption of normal lending and investing".

Normal lending and investing? ... Yea right. If the "Lending Guru's" go back to biz as usual to pad their bottom line, we may never really know what their real worth is. How about investing in that?...... And don't think you can feed me crap about limiting execs compensation, I'm not a fool. Next time you pay your taxes just remember you're contributing to their kid's new jet ski fund.

Let's get a deal like Warren Buffet got where he was able to loan 5 billion and get 10% dividends with the option to buy more! WAMU went into bankrupsy and was bought out by another company not costing the FDIC or the taxpayers a penny. There has to be a way to force more responsibility on the corporations that mismanged corporate assets and those that took out morgages they could not pay.......

WHy can't we get a plan like Warren Buffet did - he gets 10% dividends and options to buy more! Look at the WAMU buy-ot - It didn't cost the FDIC a penny. Sure they went bankrupt, but that is what happens when they don't do their jobs and lend money to unqualified people!

Tony Z.

See what should be done about the bailout here:
http://www.votenic.com

Be nice now to have all the money wasted and stolen - and still being wasted and stolen - in Iraq reconstruction. Be nice to have a President who wasn't always begging Americans for more money. Be nice to have someone in the financial sector with a conscience. Be nice to just have some responsible leadership in this country. For a change.

$700B is almost a trillion ($300B short). I wonder how much it would cost the economy if there was a small bailout or no bailout. And frankly, it seems that there will be a recession anyway, but how bad will it be.

Paulson is missing the point as are most of these so called economic experts.
The failure of the investment banks is due to mismanagement plain and simple, the bailout would only continue the mismanagement, at least for the short term and then we see failure rise again.

These so called economists and economic experts continue to see only the short side. Touting "supply side economics is fine; but at some point they will have to come to the obvious conclusion, the people in the US are not the supplier who benefits, China and India is.

Saving these same bankers because the bottom dropped out of the housing market is just as short sighted, the housing prices have and are making a correction based on supply and demand, Concern about so many people suddenly with upside down loans is not the fault or a problem that every single American should be responsible for, the fact is they paid too much in the beginning and now are faced with the true value of their purchase.

Paulson is trying to again raise the price of housing when a recent survey in Florida concluded 85% of buyers could not qualify for a median priced home, so we want to raise housing prices? For what so 100% cannot qualify?
Paulsons insight is just incredible, in view of its shortcomings, but it is true of most of the financial wizards, they see only the little picture, profit for the institutions.
The real problem is people simply cannot afford to participate in the economy, because they have been excluded from it, the people Paulson and his ilk fail to see except for the occasional reference to the consumers.
It's time for these people to come to the conclusion trickledown economics does not work for any but the very few and fix it from the bottom up.

You are all targeting the wrong crowd. The biggest culprits are the "average Joe???s" who over borrowed and now can???t repay what they owe. No one held a gun to their head and told them to buy a house they can't afford, or buy items on credit. Blame yourself people, you were the greedy "debt" addicts and now you are blaming those that gave you the "OPTION" to borrow. It is hilarious how no one on this board takes responsibility for this crisis - it's your fault.