So the feds are thinking of taking ownership stakes in US Banks

[nadinbrzezinski]

the irony is just too much to fathom

The most laizze faire administration in recent memory is about to partially nationalize banks

That is what the mumbo jumbo means

Yep, we're gonna follow britain on this and the Asian markets are doing better...

I will need to check on LIBOR and see if the lending and credit starts to unfreeze...

Oh and where else have I seen this... New Deal.... next step... bank holidays

Ah the irony

And yes, they have the authority to do that under the bill and that was fought tooth and nail... and in the end they allowed that in...

The irony... that is worth repeating

[scheming daemons]

1. It worked in Sweden after their 1992 housing collapse and bank problems

Nationalizing the banks in Sweden has worked wonders for them.

[nadinbrzezinski]

3. It worked in the US during the Great Depression, where Sweden got the idea

from.

It is just the irony

[magellan]

2. They need to do this IMO

They have to get their hands on the balance sheets to find out which are solvent and which aren't and start dealing with that.

[nadinbrzezinski]

4. Absolutely and the authority to do that is in the legislation everybody here hates

the one that nobody wanted to pass...

Ok, it was in, it was taken out and it was put back in... what version of the damn thing

[RoyGBiv]

10. A lot of dealing ...

Republicans didn't want to allow anything that could lead to this, and it got stripped, moved around, reworded in subtle ways ...

They eventually got the wording right so that it allowed a back-door method, which was clarified on the House floor moments before the vote. This was a staged exchanged with specifically chosen words, e.g. "equity" rather than "asset."

Mr. MORAN of Virginia. Thank you, Madam Speaker. I won't take that much time. I do want to thank the chairman for his masterful leadership on this bill, and I do want to clarify that the intent of this legislation is to authorize the Treasury Department to strengthen credit markets by infusing capital into weak institutions in two ways: By buying their stock, debt, or other capital instruments; and, two, by purchasing bad assets from the institutions, in coordination with existing regulatory agencies and their responsibilities under this legislation, as well as under already existing authorization for prompt, corrective action and least-cost resolution.

Mr. FRANK of Massachusetts. Will the gentleman yield?

Mr. MORAN of Virginia. I'd be happy to yield.

Mr. FRANK of Massachusetts. I can affirm that. As the gentleman knows, the Treasury Department is in agreement with this, and we should be clear, this is one of the things that this House and the Senate added to the bill, the authority to buy equity. It is not simply buying up the assets, it is to buy equity, and to buy equity in a way that the Federal Government will able to benefit if there is an appreciation.

Emphasis mine ...

[nadinbrzezinski]

5. Kick, the irony is just too much

[RoyGBiv]

6. Krugman's comments ...

Thought I'd just add this here ...

From his blog ...

Nouriel Roubini has some of the back story on how the TARP came to include provisions that could be used to recapitalize banks. From early on, there was indeed a feverish push by a number of economists, myself included, to get some channel for public capital injections in return for equity stakes into the plan. I reluctantly called for passage of the final bill because it did include such a channel, although it didn’t require that Paulson use it. There were a lot of accusations against those of us who took that position — claims that we were caving in, or trying to have it both ways. But the equity issue was crucial — and may now be the thing that turns a useless plan into something that really does a lot of good.

http://krugman.blogs.nytimes.com/

[MadHound]

7. Geez, I thought after the bailout flop you would have woken up

Apparently not, apparently you're willing to trust this administration even further and allow them to get into the banking industry:eyes: When are you going to learn that anything, any fucking thing this administration does isn't going to be for the benefit of the people of this country, but for the benefit of the few. You're still thinking along the lines of Bushco, a top down solution. That isn't going to work, we need a bottom up solution.

Oh well, when this collapses into ruin also, perhaps you'll finally wake up. Never, ever trust anything that comes out of this administration.

[SammyWinstonJack]

8. !!!

:thumbsup:

[Marsala]

11. The bailout didn't flop; the markets just tanked anyway

The bailout hasn't even technically started yet. Paulson's willingness to move towards the Swedish solution is a good thing (probably).

[MadHound]

13. The bailout is a flop with the markets

Four hundred point drop the minute it passed last Friday. The great surge of confidence that was supposed to result didn't happen. Many firms are already stating that they may not take part in it due to either legal, moral or financial reasons. Meanwhile Paulson is having some buddy of his from Goldman Sachs in charge of running the bailout program, like that's really going to work. Meanwhile, anywhere from 10 to 100 billion is going to be diverted to the White House for whatever reasons, and the economy simply isn't reacting, it's crashing. Now we're adding more debt load on top of this with the bright plan to buy up short term debt, and now this bank buyout. Gee, any day now our Moody's and S&P are going to tank our bonds and we will be well and truly fucked.

[leftchick]

24. I completely agree with you MH. Question though......

what the hell is "anywhere from 10 to 100 billion is going to be diverted to the White House for whatever reasons" all about?? Do tell!

[RoyGBiv]

12. Paulson is being forced into this ...

... forced by events and by foreign central banks who are busy screaming at him and the administration. This is one of the few things over which the administration as a whole has lost the ability to control in a way to which it is accustomed.

In any event, this is precisely the thing that should be done ... quickly. It's the strategy basically every liberal economist with a voice has been urging since day 1.

[MadHound]

14. Bullshit, Paulson is seeing this as another way for him and the administration to gather more power

Either that, or sheer, simple desperation, or a combination of both.

[RoyGBiv]

16. If you say so ...

You put forth such an effective argument, after all.

As noted, this is, for all intents and purposes, the Swedish model that it used to fix its economy. As I said, liberal economists everywhere are pushing this. If you think they're wrong, please let us know why by actually addressing the argument.

[MadHound]

18. What works for the Swedes won't work here

Different conditions, different regulation structure, and mainly different motivations. I suggest that you go look into those differences.

[RoyGBiv]

20. This is all we get ...

Won't work. Can't work. We're doomed no matter what. We're all screwed. Nothing is ever added to this in the way of, oh, what an economist says or a historian or a financier, etc. Just ... nope ... won't work.

Yes, I know about some of the differences in the two countries. But why don't you tell me about it and let me know, specifically, why this won't work.

You might try addressing the arguments put forward by Krugman, Brad DeLong, Nouriel Roubini, et al while you're at it. As economists, they seem to have a different opinion than you.

[HamdenRice]

21. I agree completely, and it's overall a good thing

If you read any of the media accounts of how this plan developed, Bush and his cronies have been completely out of the loop. This is entirely the work of Hank "This isn't socialism, this is necessary" Paulson and Ben Bernanke, whose life work has been figuring out how to avoid a great depression and appears to have been a closet liberal.

The best part is this gets done before Obama is sworn in because the right wing loons are saying that Obama is a socialist. Now socialism is a fait accompli and Obama gets to run it without having to take responsibility for having set it up.

[RoyGBiv]

22. I hadn't thought of that angle ...

The part about not being able to blame it on Obama ... of course, they'll *try* anyway, but that's interesting.

Like Krugman, I wish they'd made this the point of the "bailout" bill in the first place. The staged back and forth between Moran and Frank suggests to me they couldn't get the votes for it from the right wing and blue dogs with such an explicit provision.

[Hidden Stillness]

17. Agree With This

I agree with this post, though with maybe not quite so much sarcasm to the original poster. I think the last thing in the world that would ever happen with this current crowd, is anything, anything, like the New Deal, (which would really help us). If they had wanted to be like the New Deal, they already would have had a huge takeover of mortgages that people were being foreclosed on, at reduced prices, with terms reworked so that people could pay (as Roosevelt's HOLC); no money has gone to help people, to help unemployment, etc., so there you go. Your statement about how nothing this Admin. does will be for the benefit of the people, is also my opinion--they will do nothing the New Deal would have done, but will follow exactly that bastard asshole Reagan at every possible turn. This should not even be called "Nationalizing" the financial system, as it will not benefit us and is nothing like the current European plans--it is merely the taxpayers taking over the debt of the rich capitalists and paying it for them! The claim that we will "profit" from this deal--buying none of the good properties but only the worst, most corrupted losers, is insulting and fake. The citizens serving and paying the debts of corporations, while getting nothing for it and nothing from the Government that would help the people directly, is fascism, not "Nationalizing" anything. We will get nothing out of this; it is for THEIR benefit, being "framed" to us. Europe is trying to help its people; Republicans here are trying to bring back the Gilded Age.

[MadHound]

19. The sarcasm was necessary, because the OP has been one of the biggest cheerleaders

For every failed Bushco proposal that has come down the pike over the past few weeks. Sorry if it offends you, but IMO it's necessary to get a point across.

[DemoTex]

9. What sayeth the Freeps about this turn of events?

I don't have the stomach to visit Freeperdom.

[anigbrowl]

25. "Prayers for President Bush!". Seriously.

They're just not posting about it. The 2 economics posts on the front page have a few replies muttering that 'it's part of the business cycle' and 'the Europeans are running to us for help again'. Seems they've decided the economy doesn't exist and are just filling the time with 'Obama = doom' and 'we could still win this' posts.
http://www.freerepublic.com/focus/f-news/2101707/posts

[RoyGBiv]

26. I have prayers for Bush too ...

... just not the kind they'd like. :-)

We've seen some of the "this is just part of the business cycle" crap here too, usually worded somewhat differently, but with the same meaning.

When I see this I wonder if the people posting it even know what they're parroting.

[anigbrowl]

29. Well you know all business is thievery

basically it's a conspiracy to take your $ to some country where they're not legal tender; by crashing the US economy and raiding the treasury (which is full of US banknotes), the evildoers will then move to a tropical resort and just sit around the pool sipping cocktails and laughing as they pay the help with our now completely worthless currency notes, which the help will slavishly accept even though they can't be spent anywhere.

Meantime true patriots resurrect the American economy, which becomes a net exporter of guillotines and hand-woven baskets, traded at hippie markets for beads and vegan sandwiches.

[RoyGBiv]

31. Ah, yes ...

How could I forget about that.

So silly of me.

:-)

[ChiciB1]

15. We Re-Financed Our Home Back In 1999 Due To A Crisis That Occurred

with one of my children. At the time, we owed only $38,000 and opted for a 15 year loan. We were told that at the end of the 15 years, there would be a small balloon of around $5,000 to $6,000 and felt we could deal with that.

UNFORTUNATELY... and OUR ENORMOUS BAD, we didn't use a lawyer and STUPIDLY assumed what they were telling us was true. Now I completely admit that we only wanted to save money by NOT hiring a lawyer and it was the WORST thing we could have EVER done! Verbal statements are just that... verbal statements. We re-financed for $79,000.00 so we could get the extra cash for the crisis, and signed ALL THOSE PAPERS they put in front of you one after another at a very fast clip! What we overlooked was on one of the last pages, and THE ONE that was most important! We know that when you get a mortgage that over time with interest tacked on the amount is much larger, so we signed away thinking that what we were TOLD initially was in fact the TRUTH!

This loan has been sold 4 times since initiation and while I pay ON TIME ALWAYS, and add a little extra to principal I wasn't seeing the balance go down as I thought it should. I called up the company to ask WHY! Well, due to our stupid "faith" on their word, it seems the balloon is actually $67,000 and the end of the loan!!! So even though we DID get a 15 year loan "on paper" we are in effect paying on a 30 year loan! And THAT balloon payment will be due in FULL in 2014, so we have about 6 years to deal with this nightmare! I don't BLAME anyone but ourselves, but I've lived in the house since 1984 and WILL NOT let anyone take it! Our only recourse at this moment in time is a Reverse Mortgage when the time gets close. The initial money we got from the re-financing still wasn't enough for the ongoing crisis, and we had to take a GREAT deal of money out of our savings too. Our money is invested with Morgan Stanley, AND not very much anymore.

But my real worry is this... will all this mess actually wipe out the Reverse Mortgage option we have been planning on?? And yes, I DO KNOW how Reverses work... the Government makes money by the interest they charge which will accumulate until the house is sold. Our children will eventually be liable for the payment when we die. Unless the whole of this country actually "implodes" they will be able to sell the house and still realize "some" profit when the time comes.

Right now I don't qualify for the Reverse, you have to be 62, but I will very soon. My husband is older but I say "wait" until around 2013 before we do it. But WILL IT STILL BE AVAILABLE BY THEN???

Even with all the above I consider myself lucky as we also own 5 acres of land that's paid for, but taxes need to be paid each year, and here in Florida we either sell very low right now or wait it out.

Anyone have any advice??

I posted this on another blog but got no reply.

[Ikonoklast]

23. I want a toaster.

Not asking for much, really, as a new citizen-stockholder of some of the most worthless financial paper ever seen.

You'd think living in The Brave New Socialist World one could get his bagels toasted, at least.


Socialism sucks for the little guy.

[Fire Walk With Me]

27. Doesn't this mean =privatize=?

They let FEMA fail in order to make it such a target of ridicule that Halliburton will certainly get all the related contracts from now on.

Follow the money. Who stands to profit here?

[RoyGBiv]

28. This is the opposite of "privatize."

For all intents and purposes, this is the Elmendorf Plan via a back door, the back door being necessary because the Republicans in Congress couldn't look past their own ideological purity (see Hoover, Great Depression) to do the right thing out in the open.

From Brad DeLong's blog:

"The Elmendorf Plan: Have the government directly invest in and take an equity stake in troubled banks, thus reassuring their depositors and creditors that they are sound. The banks will then be able to profit by buying up distressed securities--hence raising their prices--and by directly lending to companies that will then be able to hire more workers, and depression will be averted."

Further:

The argument for the Elmendorf plan was that it held the promise of doing a much better job of preventing depression, for each dollar committed to the Paulson plan reduces the gap between the demand and supply of distressed securities by only $1, while each dollar invested in a bank is then leveraged 8-to-1 as bank creditors and depositors are then willing to keep more money in the bank and so reduces the gap between the demand and supply of distressed securities by $8. Eight times as much bang for each federal buck, and the Elmendorf plan ensured that the taxpayers were protected to a greater extent: we did not just have the socialization of loss after the privatization of gain, we had the socialization of any gains that might occur if banks' equity values ever recovered.

Emphasis mine ...

More, including what John McCain wants to do (which is the opposite, i.e. invest the taxpayers with all the loss with no ability to gain anything) at: http://delong.typepad.com/sdj/2008/10/john-mccains-ne.html

[Fire Walk With Me]

30. Very interesting, then...

[Geek_Girl]

32. If we get Nationalized banks due to the passing of the Bailout then I'm for the bailout

nt

[sarcasmo]

33. Are we now Socialists?