Not a fair bailout for all?

[nosaj070 10+ year member]

i remember reading something about this a few days ago. what did they expect? that the banks would use the money for what it was meant for.

hell no

thats vacations for CEO's and upper management for the holidays

That is a very common assumption, and yes in some instances the money is being used in the wrong places. But basically the reasoning is that every financial institution is de-leveraging and as a result decreasing their investments in risky assets. The only real news of companies pissing money away is AIG, and that is most likely spun to appeal to everyday citizens. To look at (a slightly) more hopeful example, Goldman Sachs, the bank of all banks eliminated executive bonuses, and many followed suit.

They are beginning to be more responsible, the issue is that due to the current uncertainty of the markets making risks right now is not beneficial to them. Yes they received bailouts, but aside from the tax payers to satisfy they need to take care of their shareholders whom have been severely affected. They are not going to risk further losses by forcing investments.

In my opinion by late 09 and early '10 you will begin to notice the benefits of the financial bailout. Credit markets should begin to open up and the economy will begin its long bounce back to a somewhat strong one. I for one believe that the US will never be the same. The entitlement that seemingly everyone possesses to be wealthy will deteriorate and eventually we will ideally return to a profitable prospering nation, but not the powerhouse we once were.

 

[duece212 5,000+ posts]

That is very true. The problem with banks going bankrupt is the ripple effect it has. It obviously would be the best solution to the problem at hand. For example just imagine what would happen to small businesses if they still couldn't obtain credit (although many cannot). Many of them rely on seasonal loans to finance their increased holiday inventory, without those loans they cannot survive. Granted many of them still did not get the financing they needed (I'm not positive) but I do know that in some secure instances the markets opened up a bit.
To address the other issue with buying "assets" for pennies on the dollar is that many of those assets still aren't worth crap, not even pennies. Still institutions are not lending money, but the strong ones are still acquiring potentially profitable investments. JP Morgan Chase is an excellent example, they have a solid (relatively) balance sheet and are demanding to be the lead on most large M&A deals happening today. The strongest are still leading the pack, the bailout is simply protecting the people and the foreign markets.

To avoid the argument AIG is a freaking mess. Anyone in their position who increases dividends alongside a strategy to raise capital is so far out of focus they cannot even be discussed. That organization enrages me beyond belief, the problem once again is that them failing would have repercussions for people that don't even know what AIG does.

It doesn't appear that the bailout helped unfreeze the credit markets, it appears the money was hoarded or used to acquire smaller institutions to grow themselves. That said we aren't any better off for business that operate month to month on credit, or credit access to customers to start driving purchases again (not that I think more people buying on credit again is a good thing). Agreed alot of these "assets" aren't worth dick, which makes them ugly to acquire but all we are doing with the bailout is continuing to support those "assets" as a burden on their current owners.

We are damned if we do and damned if we don't, so I vote don't interfere...

 

[duece212 5,000+ posts]

In my opinion by late 09 and early '10 you will begin to notice the benefits of the financial bailout. Credit markets should begin to open up and the economy will begin its long bounce back to a somewhat strong one. I for one believe that the US will never be the same. The entitlement that seemingly everyone possesses to be wealthy will deteriorate and eventually we will ideally return to a profitable prospering nation, but not the powerhouse we once were.

Agree with the bolded part 100%. As for the rest, I sometimes wonder if we let the failing institutions fail and let the survivors pick up the pieces how soon would it be before we saw a bounce back? And if we will not bounce back to the same level we were once at, why are we trying to infuse money to keep that level now?

 

[nosaj070 10+ year member]

It doesn't appear that the bailout helped unfreeze the credit markets, it appears the money was hoarded or used to acquire smaller institutions to grow themselves. That said we aren't any better off for business that operate month to month on credit, or credit access to customers to start driving purchases again (not that I think more people buying on credit again is a good thing). Agreed alot of these "assets" aren't worth dick, which makes them ugly to acquire but all we are doing with the bailout is continuing to support those "assets" as a burden on their current owners.
We are damned if we do and damned if we don't, so I vote don't interfere...

Man I love hearing from well educated people on this forum. Arguing with you would be a waste of time, it boils down to economic opinions. Only time will tell what is right, and even that may not help. It is going to be a very interesting couple of years to see how everything is affected.

I need to go to bed, work tomorrow (yeah christmas eve) should be a blast.

 

[duece212 5,000+ posts]

They say ignorance is bliss....that's horse shit. I'm ignorant yet not very blissful about this whole situation //content.invisioncic.com/y282845/emoticons/laugh.gif.48439b2acf2cfca21620f01e7f77d1e4.gif

 

[snoopdan 5,000+ posts]

wow, if only I got poast count credit for threads I start //content.invisioncic.com/y282845/emoticons/laugh.gif.48439b2acf2cfca21620f01e7f77d1e4.gif

 

[Flipx99 5,000+ posts]

Financial institutions could have gone through bankruptcy and had their "assets" sold for pennies on the dollar to the highest bidder. This would have given the opportunity for certain financial institutions to actually make gains via those that failed...natural course of business. Propping markets/institutions/etc up at a fabricated level will only lead to failure later.
We can take our medicine now or stretch it out, the **** is coming either way.

Depends.

If people chose to stuff their paycheck in a matress than put it in the bank, then banks cannot lend. You are assuming that at a certain price people will buy those financial instruments. That is not entirely true.

Trash is an asset, but it cannot be sold for pennies on the dollar. We actually have to pay people to take it.

 

[Flipx99 5,000+ posts]

In my opinion by late 09 and early '10 you will begin to notice the benefits of the financial bailout. Credit markets should begin to open up and the economy will begin its long bounce back to a somewhat strong one. I for one believe that the US will never be the same. The entitlement that seemingly everyone possesses to be wealthy will deteriorate and eventually we will ideally return to a profitable prospering nation, but not the powerhouse we once were.

Depends on how deep the recession is. If things start to bottom out and create a plateu where we stay at this level for a while, then you are wrong. A much more serious economic problem is required for that change. People have very short memories.

 

[bumpweLL.nYc 10+ year member]

why did the Yankees need a bailout when they just upped their own offer to CC from `160 to 180mil, and threw another 260mil at Burnett and Teixeira. And theyre not done!

More dumb business, Yankees signing long contracts so they are depending on selling $2500 seats through 8 years. HAH!

 

[Lugnutz 10+ year member]

why did the Yankees need a bailout when they just upped their own offer to CC from `160 to 180mil, and threw another 260mil at Burnett and Teixeira. And theyre not done!More dumb business, Yankees signing long contracts so they are depending on selling $2500 seats through 8 years. HAH!

Well they generate their revenue on TV contracts not ticket sales.

 

[bumpweLL.nYc 10+ year member]

Well they generate their revenue on TV contracts not ticket sales.

not with the mlb network coming.

ticket sales pay salaries and the rest is the bonus

 

[Lugnutz 10+ year member]

not with the mlb network coming.ticket sales pay salaries and the rest is the bonus

No they don't. Average ticket price for the Yankees is 36.50. Their attendance is 4 million for the season. That is 146 million in revenue. Their payroll is over 250 million. Explain to me how ticket sales pay salary and bonuses? Plus they have to pay operating costs. They make their money on TV contracts like the YES network.

 

[JimJ 5,000+ posts]

Should the government pay for their reorganization? Either way the auto companies go, it's going to cost the taxpayers. Ford has been doing a good job turning around the culture of their company. They announced the release of the Fusion Hybrid that is suppose to get 41 MPG. The problem is, the Big 3 has been slow to react. In the 70's and 80's the japs rolled out the fuel efficient cars, and the Big 3's answer was the Pinto. Then the Big 3 got caught up in the SUV's, and were slow to answer with the hybrids.

You have to wonder how many EV-1's GM would have sold if they didn't release them in '99, at 89 cents a gallon //content.invisioncic.com/y282845/emoticons/tongue.gif.6130eb82179565f6db8d26d6001dcd24.gif

 

[duece212 5,000+ posts]

Depends.
If people chose to stuff their paycheck in a matress than put it in the bank, then banks cannot lend. You are assuming that at a certain price people will buy those financial instruments. That is not entirely true.

Trash is an asset, but it cannot be sold for pennies on the dollar. We actually have to pay people to take it.

I've heard you state before that there is no reward without risk. At some point somebody's trash is somebody's treasure though, who knows if that price is ever reached. Assets in the form of secured debt owned by a bank will reach a point of good investment for some other institutions at some price. Unsecured debt...well I doubt thats a hot selling point, who knows maybe junk debt collectors get in that market at fractions of pennies on the dollar. Financial institutions also have physical assets worth purchasing...much like wamu's branches being of interest to JP morgan in their purchase.

Sure a bank can't lend with no deposits, runs on the bank are stopped by the fed if things get deep. Banks aren't lending any faster now than they did hundreds of billions of bailout dollars earlier, they and their stockholders just feel a little more secure now. Meanwhile joe citizen looking for credit and joe business trying to sell product is still screwed.

I still believe all we do by bailing out is keep bloated levels running where they shouldn't be. Shit has to fall realistically to see where the bottom really is. We can create an artificial bottom but who's to say that won't drop out at some point down the road.

 

[bumpweLL.nYc 10+ year member]

No they don't. Average ticket price for the Yankees is 36.50. Their attendance is 4 million for the season. That is 146 million in revenue. Their payroll is over 250 million. Explain to me how ticket sales pay salary and bonuses? Plus they have to pay operating costs. They make their money on TV contracts like the YES network.

because average revenue per ticket sale is way more than 36.50