"The worst financial crisis since the Great Depression"?? Really?

[kentuck]

Why do we repeat this line that comes directly from this White House? The stock market actually gained a little last week after a couple of big drops. But, it was not the worst we have ever seen. No doubt, some big banks are very nervous after AIG and Merrill-Lynch was bought out and Lehman Bros went under. The chickens are coming home to roost. But Wall Street is not Main Street, although much of Main St has put their money with the bankers on Wall St. They all have faith in the "market".

But the market is not infallible. It is not God. It is man-made. It is subject to greed and manipulation. Perhaps it is not wise to put so much faith in the "market"?

Nonetheless, this is not the worst since the Great Depression. At least, not yet. Can the people trust the words that come out of this White House or Treasury Dept? No. Basically, we have all been lied to for the last 8 years. Perhaps the country would be better off to wait until there is a new President, who is more trustworthy, whether it be John McCain or Barack Obama. We cannot deal with these liars in this White House. They cannot be trusted. It's a gamble but we have no choice.

Just as some have pointed out, once you give $700 billion to this Administration to hand out to whomever they wish on Wall Street, without any oversight, what's to keep them from moving it all to gold or moving it to overseas accounts? They wouldn't do that, would they?

[liberalmuse]

1. Did the Dems give Paulson a blank check?

I'm at work and am not up on things. If they did, they just lost the election for Obama, so I hope to hell they didn't. :(

[Jim__]

2. I don't think it's the drop in the DOW that makes this bad.

It's the bad debt that is saturated throughout the system, and cannot be easily separated from the good debt. Institutions holding CDOs, have no way to know their real value. That leads to a locking up of the credit markets. My understanding is that it's the locking up of the credit markets that is the crisis.

I agree with what you're saying about the bail out. I just think the crisis is real.

[kentuck]

7. I know some mortgages have changed hands several times...

My own, has changed 3 times before it returned to where it started, with Wells Fargo.

But, each time they sold it, I'm sure they got a good profit from it. That is how the credit has saturated the system, I suppose? But, who ends up holding the bag, in this case, the mortgage? Why is that so difficult to separate the good from the bad?? If I did not pay my mortgage every month, then I guess my mortgage could be called a "bad" loan?? What if I only missed one payment in 20 years??

[Jim__]

13. Mortgage backed securities contain large numbers of loans in one security.

There is a general description here:

The creator of a subprime residential mortgage-backed security -- or RMBS -- buys loans from all over the country, often from several different lenders. Several thousand loans go into one mortgage-backed security. Because the security combines the specific risks of all the individual loans into a single pool, its investors as a whole are less exposed to the potential problems of any one borrower.

There is a little graphic presentation as to how these things get packaged and sold. Walk through that and then figure your getting something like 3% default rate on mortgages. How do you value the security packages that you hold?

Follow how the downstream CDOs are rated. This is all unregulated thanks to John McCains' economic advisor, Phil Gramm.

[kentuck]

14. Thanks for the clarification, Jim__...

It helps in understanding this predicament. It appears that no one knows what it is going to cost? Perhaps we will just have to let the muddy water clear up for a few days? Naturally, the big shots on Wall St are scared shitless, after what has gone down in the last week or so... But, I don't see how giving this White House $700 billion to hand out at their discretion is a wise idea.

[Winterblues]

10. I think the bad Debt starts at the very top..USA National Debt

This bail out money will be added to our National Debt which is already unsustainable. Because of such economic policies from the Administration the value of our money will plummet throughout the world. We need to get our National House in order before we get Wall Street's house in order IMO. This is just throwing good money after bad and will not solve the problems. It will only address one tiny symptom not the underlying cause.

[TomClash]

3. I suspect they did that

with some of the funds they siphoned off the Iraq War and Homeland Security.

This looks like a bigger version.

Paulson's opposition to executive compensation restrictions is a big tip-off that this is a big rip-off.

[On the Road]

4. You Don't Need to Trust the Bush Administration

Just look at a diversity of people from different persuasions. I don't know anyone of any leader of business or economics who feels that the country would have survived a hands-off approach. Even before the most recent bailouts, George Soros, for example, wrote that the credit crisis was the most serious in his 77-year life. Warren Buffet recent said about the bailout that he would have done the same thing in the same situation.

The failures of a few financial giants like Bear, Lehman, and AIG were serious, but it was nothing that would have endangered the whole economy. Fannie and Freddie were involved in 70% of new mortgages and a failure would have had serious repercussions.

The real issue was that these financial firms, as well as overseas companies and central banks, are all tied together. The threat was for a cascading wave of failures. That was on the point of happening, possibly within a matter of days. Collapses in Argentina, Indonesia, and Mexico were temporary. They were reversed largely by an influx of foreign money. If the world financial structure crumbles, there is no outside entity to step in.

[kentuck]

6. Just what was the $200 billion for Fannie and Freddie supposed to do??

Did it have no impact whatsoever? I thought it was to protect the "bad" mortgages??

[On the Road]

8. Fannie and Freddie Held Part of the Bad Mortgages

that was never intended to cover the entire marketplace.

[kentuck]

11. But didn't they hold about 75% of all the mortgages ?

in the country? Did I read that incorrectly?

[On the Road]

15. They Hold About Half of All Mortgages

They have been more actively in recent years, and buy about 70% of all new mortgages.

I don't know how the $200B for Fannie and Freddie corresponds to the $700B for bad groups of mortgages. It does seem disproportionate. But the deals are fundamentally different.

I support the bailout, but don't understand the details well enough to judge all the provisions. I do not support Paulsen's recommendation to leave executive pay untouched or avoid asking for equity in exchange for buying loans.

[Naturalist]

5. SO YOU ARE INFORMED

Before the Great Depression people refused to believe that it was going to fall. Wall street financiers all the way down to laborers. Even when it was happening they refused to believe it. It was only when there was absolutely no way to refute it that they finally began to realize their circumstances. Some refused to believe it long after it happened that it happened.


If the American People with their Representation fail to arrest all crooks involved with this scam that has been going on for who knows how long, the Dollar and all Credibility will go down the tubes. All Foreign Investors will pull out of the American Market and your 401k's will be worthless. It needs to happen now. A statement that we intend to get to the bottom of what has happened and that all crooks will be jailed. Without that no amount of money for bailouts or loans will do anything.

[HamdenRice]

9. It's not the worst Depression; it's the worst Financial Crisis

The financial crisis that occurred in 1929 preceded the Great Depression. The depression hasn't happened yet and I don't think anyone is saying we are already in a "worst depression."

But a dispassionate look at the financial system does indicate that we are in the midst of the worst financial crisis since 1929.

If fact, it looks much more like 1837 than 1929 in terms of the basic building blocks of finance freezing up.

[kentuck]

12. Maybe it is all going to have to shake down...

and then we can clean it up. At this time, it doesn't appear that we know what to clean up?? We need to face the reality that there is going to be some pain and hardship. This $700 billion to the banks is not going to resolve anything.