Umm, people.....this is a LOT bigger than $700B (read the text of the plan):

[MercutioATC]

http://www.foxnews.com/story/0,2933,425672,00.html


"Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."


That's not a $700B cost...that's $700B OUTSTANDING.


Paulson buys $700B of bad debt. He has $700B outstanding. He then sells off $500B of it at 50 cents on the dollar. He just put $250B in the "plus" column and now only has $200B outstanding. He can buy up another $500B in bad debt (bringing the total out-of pocket expense to the taxpayer to $1.2T minus the $250B for a net loss of $850B, not %700B).

...and he can do this as many times as he likes...all at his own discretion...with no oversight.

[BlooInBloo]

1. Moreover, it's $700 billion AT ANY ONE TIME. No limit on the cumulative total.

Digby is excellent on this, as usual:

http://digbysblog.blogspot.com/2008/09/that-700-billion-could-parlay-into.html

[MercutioATC]

5. Yes, that was kinda my point...

[Junkdrawer]

22. National Lampoon....

[KayLaw]

2. Yes.

$700 at a time.

[Old and In the Way]

3. Where does Paulson find the money to cover this purchase?

We are running $500BB deficits and have a $11TT debt. Only one lockbox left to break into - the Social Security Trust Fund.

[magellan]

7. They create it out of thin air

Treasury bonds. Monetization of debt. When the economy explodes in their faces, as it will, then they'll have the excuse to privatize Social Security and Medicare.

[nadinbrzezinski]

12. At one point they said that they are using the gold reserves as collateral

now gold bugs should be thrilled, why am I not jumping

[bluesmail]

18. Do what they've done for the last eight or so years

COMPLICATE AND CONFUSE AND FAKE IT (and let the rigged supreme court handle it after they're gone, if they ever do disappear). Head Hurts

[DJ13]

4. And it can include non mortgage securities

Paulson could also extend the bailout to credit card companies and auto loans.

[erpowers]

6. Heard That This Morning

I was listening to the Today Show this morning and heard that the $700 Billion figure was just the beginning. At the Today Show they said it could go up to $1.4 Trillion. From what I remember from this morning there will be at least another $100 Billion needed to finance this bailout. Other expensives will be added later.

[halobeam]

8. OMG... How many... or better yet, FEW people, KNOW THIS??

Should be rec'd up to top.

[MannyGoldstein]

9. I Think The Math Is Different - But It Doesn't Matter

If he sells $500B at 50% off, he gets $250B, so outstanding becomes $700B-$250B = $450B - he still only has $250B to buy more stuff.

HOWEVER, it doen't matter - this will require more money, and the spineless cephalopods in Congress will give it to him.

[MercutioATC]

14. I disagree. If he sells off $500B, he only has $200B OUTSTANDING,

regardless of what he gets for the $500B investment he sold off. That's why it says "outstanding at any one time".

If a sale is completed, the investment involved is no longer "outstanding".

...at least, that's the way I read it...and, with Paulson having complete discretion without any oversight, that's the way I'd bet he'd read it too...

[shraby]

10. I tried to bring that to du'ers attention this morning but

no one paid any attention.

[MercutioATC]

15. I didn't notice it until now.

Kudos for addressing it here this morning!

[nadinbrzezinski]

11. I was doing the numbers last night

we are looking at 3T, that is why you need to make much noise NOW

WRITE your congress critters

Read section II... that is no bid contracts

[Tutonic]

13. How teh Hell can anyone expect to pay that off in a lifetime? We

will soon be a third world nation.

[nadinbrzezinski]

17. We already are

and it depends on how you do this

3T sounds like a lot, but if you invest that money in building infrastructure... sooner or later you will get money back

If you do this, well it could go poof

Problem is, they did nothing in 1929 and we know how that movie ended, so it truly depends ON HOW this money is used

And yes, with a lot of caveats you can use it to insert liquidity, which is what they want to do... (and they need to do...) lack of liquidity will lead to most business having anywhere from serious problems to going under

Most bidness larger than a small mom and pop rely on credit for day to day operations... not on cash on hand

[slipslidingaway]

16. K&R...only limited by the debt ceiling and the two year time limit

in the proposed bill, how much bad debt can be dumped in two years and will the debt ceiling be raised again???


http://globaleconomicanalysis.blogspot.com/2008/09/700-billion-bailout-proposal.html

"...Weep For The Taxpayer

Notice that this bill raises the national debt. Notice that the bill is supposed to take into consideration "protecting the taxpayer".

The reality is this bill does not and cannot protect the taxpayer. Rather this bill only promises to take the taxpayer into consideration. The Treasury will indeed take the taxpayer into consideration, then immediately discard any such ideas.

Inquiring minds are also noting "The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."

The idea behind the above statement is to allow for a continual dumping ground such that there will always be $700 billion in toxic garbage held under this program. As soon as any asset can be unloaded by the Treasury at cost, another toxic loan is eligible to be assumed on the books of the Treasury. This process can last for as long as two years..."

[dixiegrrrrl]

19. Hey ..not worry....chill out, plz

See, the truth is..
The US ain't got that kind of money.
We are broke.
Japan and China has it all.

Ha ha ha...joke's on Paulson....:rofl: :rofl:

And the kicker is...

Us pore folk will do just fine, because we know how to live without much.
I'm so poor I can't even afford debt.

It's the guys in the chauffeured long black cars that gotta watch out for angry people in the street.

And it all seriousness, now, I am amazed that the people who have lost their homes already have not grabbed pitchforks and stomped to the state capitols.

[MercutioATC]

24. I had the opportunity to be poor, but I blew it.

I'm firmly entrenched in the middle class. I retire in 7 1/2 years (at 48) and intend to live completely off the grid in a remote part of Costa Rica. I'm not riding in limousines nor am I saving to that end...I'm just trying to get by until 2016.

[AzDar]

20. Someone needs to put the breaks on this until it can be dissected and analyzed

Please.

[BrklynLiberal]

21. They are trying to totally bankrupt the country...

[RUMMYisFROSTED]

26. "They are trying to totally bankrupt the country...

They are trying to totally bankrupting the country...

Better.

[On the Road]

23. Paulsen is Not Exactly Giving Stuff Away

The AIG deal involves a 10-11% interest rate and required that AIG give 80% of its equity to the government. That equity is going to be worth a lot in a couple of years.

The bad debt is being bought in blocks. Not all the mortgages are bad -- if I understand what they're doing, at least 80% are likely to be performing. On the 20% that foreclose, the mortgage holder generally recovers at least 75% of the value, even in this enviroment.

The net effect is not going to be known for some time, but it will probably be nowhere near the numbers that are being thrown around in the press.

[MercutioATC]

25. Oh, I know that it's not a complete writedown...not even close.

...but that assumes that this adequately fixes the economy...and I don't think it will.

Beside the fact that there are no restrictions on this money with the current language (it can be used for ANYTHING, including things like credit card debt) and the fact that the language specifically prohibits any oversight, this plan won't do a thing for the economy as a whole if it doesn't make enough of a difference to turn things around.

We'll have bailed out a bunch of investment companies and banks, received a small net loss at best (and that over decades), and things will be exactly the same.

[chill_wind]

27. Kick