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To bailout or to not bailout?

3K views 96 replies 23 participants last post by  Sparko1030 
#1 ·
Curious as to how my fellow USA citizens feel about the whole mortgage fiasco especially in light of the bailout's demise at the moment. What would be the most appropriate action in your opinion? Emotional, knowledgable whatever. Thanks.
 
#81 ·
http://money.cnn.com/2008/10/07/news/economy/bailout_poll/index.htm?postversion=2008100712

Bailout doesn't help average Americans (poll)
By David Goldman, CNNMoney.com staff writer
October 7, 2008: 12:09 PM ET

NEW YORK (CNNMoney.com) -- The government said last week's $700 billion financial bailout was necessary to help Wall Street and Main Street alike, but most Americans don't think the plan was intended to benefit them, according to a survey released Tuesday.

In a CNN/Opinion Research Corp. poll, only 40% of Americans think the legislation was an attempt to rescue the economy in order to help ordinary taxpayers. Instead, 53% saw the bill as mostly a bailout for Wall Street.

Politicians said the bill was a last-resort move to thaw the frozen credit markets. They said the credit crunch could eventually hurt everyday Americans, because banks would not issue loans for cars, tuition or homes. Lawmakers said businesses would also be forced to cut payrolls, leaving hundreds of thousands more Americans out of work.

"By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country," President Bush said last week after the House voted 263 to 171 to pass the measure.

But taxpayers weren't buying it. The survey of more than 1,000 Americans, conducted Oct. 3-5, found that 59% thought the bill would treat taxpayers unfairly. Almost as many - 52% - thought the bill would waste money.

Many economists disagree, arguing that the government was the only buyer left who could help banks from dragging their anchor.

"If companies continue to write down loans, they take a hit to their capital, and they're going to make fewer loans in the future or charge a higher interest on loans that they do make," said John Silvia, chief economist at Wachovia. "Most Americans don't put the two together."

Still, taxpayers didn't think the bill was a good investment. Some 20% believed the government will not get back any of the $700 billion it plans to invest in troubled asset-backed securities, and about half of those surveyed thought the government would get only a little money back.

Just 25% said the Treasury would get most of its investment back, and only 4% said it would get it all back.

"At the end of the day, it's going to be an expensive plan, but the government had to step in," said Silvia. "It's a difficult thing to estimate, but the government could sell the assets at a decent price once the market's better."

Though skeptical, Americans were somewhat confident that the bill would do some good. Of those polled, 51% said they believed the legislation would help ordinary Americans who have mortgage problems keep their homes.

Congressional Democrats succeeded in amending the original Bush administration proposal by adding in provisions that support homeowners at risk of foreclosure, in part by giving the government more say in how loans for troubled borrowers are modified so people can stay in their homes.
 
#82 ·
Terrible news for Iceland. I thought I'd post it here since their crisis is very familiar to our mess:

Iceland teeters on the brink of bankruptcy

By JANE WARDELL, AP Business Writer
Tue Oct 7, 3:40 PM ET



REYKJAVIK, Iceland - This volcanic island near the Arctic Circle is on the brink of becoming the first "national bankruptcy" of the global financial meltdown.


Home to just 320,000 people on a territory the size of Kentucky, Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

The government had earlier announced it had nationalized the bank under emergency laws enacted to deal with the crisis.

"We have been forced to take decisive action to save the country," Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

One of Iceland's biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers — including enough to make it the largest private company in Britain, where it owns a handful of stores such as the famous toy store Hamley's.

Kaupthing, Iceland's largest bank and one of those whose share trading was suspended last week to stop a huge sell-off, has also invested in European retail groups.

Thousands of Britons have accounts with Icesave, the online arm of Landsbanki that regulators said was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.

To try to wrest control of the spiraling situation, the government also loaned $680 million to Kaupthing to tide it over and said it was negotiating a $5.4 billion loan from Russia to shore up the nation's finances.

The speed of Iceland's downfall in the week since it announced it was nationalizing Glitnir bank, the country's third largest, caught many by surprise despite warnings that it was the "canary in the coal mine" of the global credit squeeze.

Famous for its cod fishing industry, geysers, moonscape and the Blue Lagoon, Iceland was the site of the Cold War showdown in which Bobby Fischer of the United States defeated Boris Spassky of the Soviet Union in 1972 for the world chess championship. Last year, Iceland won the U.N.'s "best country to live in" poll, with its residents deemed the most contented in the world.

No more.

Despite sunny skies Tuesday after three days of unseasonably cold weather, Reykjavik's mood remained grim — cafes were half-empty, real estate agents sat idle, and retailers reported few sales.

"I'm really starting to get worried now. Everything is bad news. I don't know what's happening," said retiree Helga Jonsdottir as she headed to a supermarket.

Icelanders are also beginning to question how a relative few were able to generate the disproportionate wealth — and associated debt — that Haarde has warned puts the entire country at risk of bankruptcy.

Iceland's reinvention from the poor cousin in Europe to one of the region's wealthiest countries dates to the deregulation of the banking industry and the creation of the domestic stock market in the mid-1990s.

Those free market reforms turned Iceland from a conservative, inward-looking country to one of a new generation of internationally educated young businessmen and women who were determined to give Iceland a modern profile far beyond its fishing base.

Entrepreneurs become its greatest export, as banks and companies marched across Europe and their acquisition wallets were filled by a stock market boom and a well-funded pension system. Among the purchases were the iconic Hamley's toy store and the West Ham soccer team.

Back home, the average family's wealth soared 45 percent in half a decade and gross domestic product rose at around 5 percent a year.

But the whole system was built on a shaky foundation of foreign debt.

The country's top four banks now hold foreign liabilities in excess of $100 billion, debts that dwarf Iceland's gross domestic product of $14 billion.

Those external liabilities mean the private sector has had great difficulty financing its debts, such as the more than $5.25 billion racked up by Kaupthing in five years to help fund British deals.

Iceland is unique "because the sheer size of its financial sector puts it in a vulnerable situation, and its currency has always been seen as a high risk and high yield," said Venla Sipila, a senior economist at Global Insight in London.

The krona is suffering in part from a withdrawal by a falloff in what are called carry trades — where investors borrow cheaply in a country with low rates, such as Japan, and invest in a country where returns, and often risks, are higher.

After watching the free-fall for several days, the Central Bank of Iceland stepped in Tuesday to fix the exchange rate of the currency at 175 — a level equal to 131 krona against the euro.

Haarde said he believed the measures had renewed confidence in the system. He also was critical of the lack of an Europe-wide response to the crisis, saying Iceland had been forced to adopt an "every-country-for-itself" mentality.

He acknowledged that Iceland's financial reputation was likely to suffer from both the crisis and the response despite strong fundamentals such as the fishing industry and clean and renewable energy resources.

As regular Icelanders begin to blame the government and market regulators, Haarde said the banks had been "victims of external circumstances."

Richard Portes of the London Business School agreed, noting the banks were well-capitalized and had not bought any of the toxic debt that has brought down banks elsewhere.

"I believe it is absolutely wrong to say these banks were reckless," said. "Quite the contrary. They were hugely unlucky."
 
#87 ·
Terrible news for Iceland. I thought I'd post it here since their crisis is very familiar to our mess:

Iceland teeters on the brink of bankruptcy

By JANE WARDELL, AP Business Writer
Tue Oct 7, 3:40 PM ET
I'm gonna read this, I swear ...I'll try. Thanks. I've seen the peculiar heading of Iceland's currency, versus the other Scandic Krone(r). [It was the only one dipping against the dollar.--]
 
#84 ·
I'm not familiar with the American financial system and what money exactly the average man would lose. For example: day-to-day money, standard saving book money should not be lost, life insurances which are not exclusively based upon the stock market should not be lost. But if you're "gambling" with depository receipts and the system crashes, then sorry, you took the risk and you know it can be gone.

I'm rather against the bailout, at least that's true in the sense they're planning it in Germany for some banks (don't know the details about the US one). Their enormous profits are private, but their losses are now suddenly common property?

Time to face the music and add a bit longsight into the business, not only the best financial mathematicians and managers for those only the "today" counts, who are careless and utterly geery for profit and have to face hardly any harsh consequences for that, except that they're getting fired with a big compensation.
 
#86 ·
http://news.yahoo.com/s/ap/20081008/ap_on_bi_ge/meltdown_aig


AIG execs' retreat after bailout angers lawmakers
By ANDREW TAYLOR, Associated Press Writer
Tue Oct 7, 11:15 PM ET

WASHINGTON - Days after it got a federal bailout, American International Group Inc. spent $440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings, according to lawmakers investigating the company's meltdown.

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers still were enraged over thousands of dollars spent on outing for executives of AIG's main U.S. life insurance subsidiary.

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," the committee's chairman, Rep. Henry Waxman, D-Calif., scolded the company during a lengthy opening statement at a hearing Tuesday. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."

Former AIG CEO Robert Willumstad, who lost his job a day after the Federal Reserve put up the $85 billion on Sept. 16, said he was not familiar with the conference and would not have gone along with it.

"It seems very inappropriate," Willumstad said in response to questioning from Rep. Elijah Cummings, D-Md.

"Those executives should be fired," Democratic presidential candidate Sen. Barack Obama said at a debate with Sen. John McCain on Tuesday, referring to the retreat participants. Obama also said AIG should give the Treasury $440,000 to cover the costs of the retreat.

But Eric Dinallo, superintendent of the New York State Insurance Department, said he could see the value of such a retreat under the circumstances.

"Having been at large global companies and knowing what condition AIG was in ... the absolute worst thing that could have happened" would have been for employees and underwriters in its life insurance subsidiary to flee the company.

"I do agree there is some profligate spending there, but the concept of bringing all the major employees together ... to ensure that the $85 billion could be as greatly as possible paid back would have been not a crazy corporate decision," Dinallo told the House committee.

The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released by the committee, which is examining the chain of events that forced the government to bail out the conglomerate.

The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.

"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."

AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.

Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.

For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, PricewaterhouseCoopers confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.

Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.

Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg — who ran AIG for 38 years until 2005 — canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Willumstad.

"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."

Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.

Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 — even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.
 
#91 ·
There is bail-out everywhere around the world, but the bosses of six of the formerly biggest banks of the US get bonuses of altogether $70bn! :retard: :retard: :retard:

Source
 
#92 ·
I supported this bailout because I thought it was important to prevent an all out depression, but it seems that the money can be used as companies like. Why didn't congress put more restrictions on how it could be used? They just trusted Wall Street to use the money as intended??? This really makes me mad :mad: If I had realized they were just handing them a check with no strings attached, I would have rather taken a chance on another depression.....

http://money.aol.com/investing/adding-insult-to-injury?icid=100214839x1211972686x1200774394
 
#97 ·
:eek: :rolls:

( I knew I should have looked it up! )
 
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