Obama 7 - now what?

[MinnFan]

Re: Obama 7 - now what?

Personally, I would take the outcome of the economy since Obama took over at the beginning of March and the accompanying spending vs the alternative of having the govt walk away from the economy.

Again, the option has not been spending or a great economy...its been spending or all evidence led us to believe an April stock market crash and seizing up of the financial markets. In the long run, the economy is slated to grow to cover a decent amount of the deficit...if it doesn't, I hate to think what would have happened had the govt publically said we'll just let them all fail.

There is a lot of evidence showing that it wouldn't have been nearly as bad as thought if the gov't had let those firms fail. Plus, that has nothing to do with the additional "stimulus" spending.

I would argue that we would already be in a sustainable recovery at this point if we had let the market hit bottom. Right now, we are setup for a double-dip recession as any gains to date have been due to gov't subsidies and once they are cut out the market will collapse again. On top of that you will have private firms competing against rising interest rates for capital due to the increases in gov't spending leading to very little growth in the out-years.

 

[LynahFan]

Re: Obama 7 - now what?

"Companies design weapons systems to make them difficult to kill."

On the battlefield, hard to kill is a good thing. In Congress, not so much...

 

[BearPaw]

Re: Obama 7 - now what?

Thanks.



Our tax dollars at work.

The senate approves $2.5 billion to Boeing. Boeing is a corporate member of the Council on Foreign Relations and so are most of our senators. Who are our tax dollars working for?

 

[Rover]

Re: Obama 7 - now what?

There is a lot of evidence showing that it wouldn't have been nearly as bad as thought if the gov't had let those firms fail.

I'd love to see the sources of this "evidence". Kindly post a link please.

 

[LynahFan]

Re: Obama 7 - now what?

The senate approves $2.5 billion to Boeing. Boeing is a corporate member of the Council on Foreign Relations and so are most of our senators. Who are our tax dollars working for?

Of course, given the current climate, the Senate probably only saw two choices anyway:

1. Buy more planes.
2. Slash the planes and increase the stimulus by $2.5B to make up for it

Given that the money will be spent, at least the military is getting something out of it rather than wasting it on solar projects or something.

 

[MinnFan]

Re: Obama 7 - now what?

I'd love to see the sources of this "evidence". Kindly post a link please.

Depends which bailouts your speaking of. I'll admit that some may have been necessary in the financial sector (though not to the extent that were made)

AIG not needed
Reasons behind bailout

The rest of the bailouts and the stimulus were nothing more than political payoffs that will come back to bite us in the form of inflation and higher interest rates.

Jobs Saved or Created is Fantasy

 

[ScottM]

Re: Obama 7 - now what?

Depends which bailouts your speaking of. I'll admit that some may have been necessary in the financial sector (though not to the extent that were made)

AIG not needed
Reasons behind bailout

The rest of the bailouts and the stimulus were nothing more than political payoffs that will come back to bite us in the form of inflation and higher interest rates.

So, an Op-Ed from some academic and a blog is your "evidence"? I can't wait until you cite grafitti from a Men's Room wall.

And if it makes you feel any better yesterday's Wall Street Journal reported that AIG is starting to collect billions back from its counterparties from existing CDS as market conditions improved. Couple that with their recent pulling of assets off the market, and I suspect AIG may just pay back the feds and go its merry way in the next year or two. As distasteful and expensive as these bailouts are, the alternative of doing nothing would probably have been much worse.

 

[MinnFan]

Re: Obama 7 - now what?

So, an Op-Ed from some academic and a blog is your "evidence"?

Just quickly looking for other sources because I know how much everyone here loves CATO.

Very good, but long, look at the financial bailouts.

 

[5mn_Major]

Re: Obama 7 - now what?

Depends which bailouts your speaking of. I'll admit that some may have been necessary in the financial sector (though not to the extent that were made)

AIG not needed
Reasons behind bailout

The rest of the bailouts and the stimulus were nothing more than political payoffs that will come back to bite us in the form of inflation and higher interest rates.

Jobs Saved or Created is Fantasy

I hate to guess how many jobs would have been tied to bankrupcies at AIG, Fannie, Freddie, Bank of America, Citibank, Wells, US Bank, GM, and big insurance firms such as Hartford and Lincoln. This doesn't even touch on the loong list of firms directly tied to the fortunes of these firms. Also, anyone involved in the markets know that the only thing that held last winters stock market prices from crashing far below 6600...was a periodic word from the govtt of bailout support.

And now, much of these bailouts are being paid as investors have flooded money back into these firms based on a govt refusal to let them go bankrupt. In the process, govt stakes in each of these firms has gone up substantially (in some cases doubled) in value.

I'm not a big fan of the concept of bailouts nor of throwing money at failing companies...but the majority of the bailouts have worked out very well and should turn a tidy profit for taxpayers while keeping financial bankrupcies from spinning out of control.

 

[Plante26]

Re: Obama 7 - now what?

I hate to guess how many jobs would have been tied to bankrupcies at AIG, Fannie, Freddie, Bank of America, Citibank, Wells, US Bank, GM, and big insurance firms such as Hartford and Lincoln. This doesn't even touch on the loong list of firms directly tied to the fortunes of these firms. Also, anyone involved in the markets know that the only thing that held last winters stock market prices from crashing far below 6600...was a periodic word from the govtt of bailout support.

And now, much of these bailouts are being paid as investors have flooded money back into these firms based on a govt refusal to let them go bankrupt. In the process, govt stakes in each of these firms has gone up substantially (in some cases doubled) in value.

I'm not a big fan of the concept of bailouts nor of throwing money at failing companies...but the majority of the bailouts have worked out very well and should turn a tidy profit for taxpayers while keeping financial bankrupcies from spinning out of control.

Several of the banks you listed were never in danger of failing--most notably Wells Fargo and US Bank. They took money from the feds so that investors/account holders of the weaker banks wouldn't draw the conclusion that their institution was going under, thus creating a rush on a bank and depleting it's reserves (see IndyMac/Schumer, 2008)

That said, financial stocks are a good investment due to their bulletproof status now: the government has already proven that they won't let a major player go under. Or the Fed/FDIC will finance/cover the buyout of a failing firm (see WaMu, Wachovia).

And: The companies you listed, short of US Bank, have slashed jobs anyhow. Coupled with Democrats verbally thrashing any firm that spent money on anything they deemed taboo (sponsorships, capital investments, client appreciation, etc.) and the bailouts probably did more harm than good to the economy. The government would have been better off giving the bailout money to the banks that weren't failing and letting them compete for the spoils of the derelict institutions--now you still have the majority of the gamblers that caused the mess in the first place still calling the shots, when they should be looking for new jobs.

 

[Rover]

Re: Obama 7 - now what?

Major is 100% correct. The disingenuous point that so and so bank had high capital reserves or was sound financially misses the point of panic selling. The reason why its called a "panic" is because people aren't acting in a rational manner on real news, they're selling on wild rumor and speculation. As banks and insurers fell one by one the notion that calm and reasoned analysis would have prevailed is ludicrious. Its great to say so in hindsight but is completely false.

Far be it from me to praise the Bush administration, but to their eternal credit they were spot on during that crisis, even though it went against everything they'd been preaching for years. Having two functioning national banks left and then expecting them to absorb the 5 largest banks in the country is a notion too stupid for words. It makes me wonder how many people out here actually have college degrees.

 

[rufus]

Re: Obama 7 - now what?

Hawaii doesn't need to release anything because the only people that question his citizenship are effing morons.

hawaii's already released all the oifficial documentation they have to. But that ain't enough for the loony bin.

You know, the 'kernelling', and the outside border isn't right for the time period, and there's no embossed stamp, etc., etc., etc. Plus, there's that birth certificate from Kenya floating around............................

 

[Plante26]

Re: Obama 7 - now what?

Major is 100% correct. The disingenuous point that so and so bank had high capital reserves or was sound financially misses the point of panic selling. The reason why its called a "panic" is because people aren't acting in a rational manner on real news, they're selling on wild rumor and speculation. As banks and insurers fell one by one the notion that calm and reasoned analysis would have prevailed is ludicrious. Its great to say so in hindsight but is completely false.

Far be it from me to praise the Bush administration, but to their eternal credit they were spot on during that crisis, even though it went against everything they'd been preaching for years. Having two functioning national banks left and then expecting them to absorb the 5 largest banks in the country is a notion too stupid for words. It makes me wonder how many people out here actually have college degrees.

There were more than two banks that were/are financially-sound. Many regional banks (Northern Trust & TCF, off the top of my head) could have played a major role in this mess. He-ll, #5 absorbed #4 (Wells Fargo, Wachovia), and PNC has been as stable as any commercial bank out there. The panic selling--at the time--only affected the banks that were either called out specifically (IndyMac) or actually WERE in trouble (Citi, BofA). I'll concede the point that panic selling is contagious, however, throwing money to problem banks doesn't make sense as opposed to rewarding the good behavior of the lenders that weren't foundering.

And, as someone who worked in the financial sector for two of the aforementioned institutions, don't start with your insults. Your condescending arrogance is exceeded only by your post's lack of anything other than your smarmy opinion.

 

[ScottM]

Re: Obama 7 - now what?

There were more than two banks that were/are financially-sound. Many regional banks (Northern Trust & TCF, off the top of my head) could have played a major role in this mess. He-ll, #5 absorbed #4 (Wells Fargo, Wachovia), and PNC has been as stable as any commercial bank out there.

So, how does the fact that each of the aforementioned "minor" institutions received TARP funds, or that Wachovia was pushed by the feds into a merger, jive with your earlier assertion that bailouts were somehow unnecessary? And the feds basically muffed the Wachovia-Citi merger. But for the fact Wells had some pretty sharp lawyers who actually read the Citi Letter Agreement, and the TARP legislation, Wachovia would be part of the Citi morass, and Wells would probably be smaller and healthier.

 

[Plante26]

Re: Obama 7 - now what?

So, how does the fact that each of the aforementioned "minor" institutions received TARP funds, or that Wachovia was pushed by the feds into a merger, jive with your earlier assertion that bailouts were somehow unnecessary? And the feds basically muffed the Wachovia-Citi merger. But for the fact Wells had some pretty sharp lawyers who actually read the Citi Letter Agreement, and the TARP legislation, Wachovia would be part of the Citi morass, and Wells would probably be smaller and healthier.

True with regards to the Wells/Citi debacle--but things worked out as they should have. Citi shouldn't have been buying ANYONE, as they are hurting big time. I'm not saying that TARP wasn't necessary, what I'm saying is rather than giving money to the idiot banks that made poor choices--thereby rewarding failure--give the money to the smaller banks and let them buy up the parts and parcels of those failing banks. The Fed and the FDIC are already on the hook for these giants--one of which could completely break the bank insurer--so rather than giving the funds to prop up the big banks, give it to the smaller ones that have proven their restraint in making risky investments.

 

[Rover]

Re: Obama 7 - now what?

There were more than two banks that were/are financially-sound. Many regional banks (Northern Trust & TCF, off the top of my head) could have played a major role in this mess. He-ll, #5 absorbed #4 (Wells Fargo, Wachovia), and PNC has been as stable as any commercial bank out there. The panic selling--at the time--only affected the banks that were either called out specifically (IndyMac) or actually WERE in trouble (Citi, BofA). I'll concede the point that panic selling is contagious, however, throwing money to problem banks doesn't make sense as opposed to rewarding the good behavior of the lenders that weren't foundering.

And, as someone who worked in the financial sector for two of the aforementioned institutions, don't start with your insults. Your condescending arrogance is exceeded only by your post's lack of anything other than your smarmy opinion.

I'll double down on my insults because you're putting forth an idiotic right wing talking point that makes no sense in reality. So I'll say again, the notion that the panic was restricted to a couple of institutions is stupid. Not kinda stupid, but stark raving stupid. Check out the stock prices of these so called banks of yours that were apparently immune to the crisis and let me know how far they sunk during that time. They sunk because people were ditching their shares, and they were headed towards worthlessness. What stopped that is the government's decision post Lehman to prevent any other collapses. With all the interconnections between banks, that halted the domino effect. Yes, two bailouts in particular, AIG and Citi, were odious. The rest of those companies would have been okay in a normal situation. We weren't in a normal situation, and again I give the Bush admin a lot of credit for realizing that and taking quick action. You think the job market is bad now, image what it would be like with a handful of regional banks left, millions out of work in the financial industry, and absolutely no credit extended to anybody who didn't have gold on hand to back their loan.

 

[Plante26]

Re: Obama 7 - now what?

I'll double down on my insults because you're putting forth an idiotic right wing talking point that makes no sense in reality. So I'll say again, the notion that the panic was restricted to a couple of institutions is stupid. Not kinda stupid, but stark raving stupid. Check out the stock prices of these so called banks of yours that were apparently immune to the crisis and let me know how far they sunk during that time. They sunk because people were ditching their shares, and they were headed towards worthlessness. What stopped that is the government's decision post Lehman to prevent any other collapses. With all the interconnections between banks, that halted the domino effect. Yes, two bailouts in particular, AIG and Citi, were odious. The rest of those companies would have been okay in a normal situation. We weren't in a normal situation, and again I give the Bush admin a lot of credit for realizing that and taking quick action. You think the job market is bad now, image what it would be like with a handful of regional banks left, millions out of work in the financial industry, and absolutely no credit extended to anybody who didn't have gold on hand to back their loan.

You're not looking hard enough. Whenever there are a number of sinking ships in the market, the rest of that particular sector gets dragged down with it. US Bank, Wells Fargo, PNC, JP Morgan and a number of regional banks took a hit along with the rest of the financials, but their stock declines weren't NEARLY as poor as BofA, Citi, WaMu and Wachovia. This is because their losses (or reduced profits, in the case of US Bank) weren't as heavy comparatively speaking.

Check the stock history, and you'll clearly see this.....which is REALITY. And then check the stock quotes of Citi and BofA. Big difference. Obviously, you didn't take the time to do so, which is demonstrated by your lack of hard facts.

 

[5mn_Major]

Re: Obama 7 - now what?

True with regards to the Wells/Citi debacle--but things worked out as they should have. Citi shouldn't have been buying ANYONE, as they are hurting big time. I'm not saying that TARP wasn't necessary, what I'm saying is rather than giving money to the idiot banks that made poor choices--thereby rewarding failure--give the money to the smaller banks and let them buy up the parts and parcels of those failing banks. The Fed and the FDIC are already on the hook for these giants--one of which could completely break the bank insurer--so rather than giving the funds to prop up the big banks, give it to the smaller ones that have proven their restraint in making risky investments.

In theory, your point is quite valid. There is a strong case that could be made that you bolster strong banks to reward effectiveness.

But the economy was not normal last winter. Say hypothetically we give TARP to institutions like TCF. The problem isn't with the positive outcome that might give them, but rather the extended implications of turning our back on the failing institutions. We have no ideal what the national and indeed international ramifications would have been to the credit markets by the reduced funds at borderline banks of say Wells or of a shutdown of Citi and BAC as the country was in crisis and shock. With a shutdown of one of the biggest financial groups in the country...first would be the instant unemployment of who knows how many (and unfortunately, strong banks would be more likely just to recognize profit or padding reserves while still limiting hiring in questionable times...esp with increased damage going on around them). Next would be a mass panic in investor circles of these major companies going under...the threat of a GM bankrupcy alone was enough to smash the Dow on more than one occasion. And moves like that are linked to personal bankrupsies. Lastly public confidence would been dented or maybe even shattered as some of the biggest banks in the country went defunct. This might have led to pull their deposits...also raising risk for other banks. And again, we have no idea the kind of ripple effect these might have had on the variety of companies relying on these players as well as the ripple effect on confidence in the economy. This would not just been an excercise of supporting effective industry players...faar more was at stake here.

 

[Plante26]

Re: Obama 7 - now what?

In theory, your point is quite valid. There is a strong case that could be made that you bolster strong banks to reward effectiveness.

But the economy was not normal last winter. Say hypothetically we give TARP to institutions ranging from Goldman to TCF. The problem isn't with the positive outcome that might give them, but rather the extended implications of turning our back on the failing institutions. We have no ideal what the national and indeed international ramifications would be of a shutdown of Citi and BAC. First would be the instant unemployment of who knows how many (and unfortunately, strong banks would be more likely just to recognize profit while still limiting hiring in questionable times). Next would be a mass panic in investor circles of these major companies going under...the threat of a GM bankrupcy alone was enough to smash the Dow on more than one occasion. Lastly public confidence would been dented or maybe even shattered as some of the biggest banks in the country went defunct. And again, we have no idea the kind of ripple effect these might have had on the variety of companies relying on these players as well as the ripple effect on confidence in the economy. This would not just been an excercise of supporting effective industry players...faar more was at stake here.

I see your point, but this scenario could have been avoided by an orderly sell-off of assets (and debt) to the smaller institutions, who would need (most of) the existing employees to manage them. Consumer confidence could easily have come from this line of action as opposed to throwing good money after bad.....which is currently just BARELY keeping BofA and Citi alive despite the continued losses these two giants are posting.

 

[Rover]

Re: Obama 7 - now what?

You're not looking hard enough. Whenever there are a number of sinking ships in the market, the rest of that particular sector gets dragged down with it. US Bank, Wells Fargo, PNC, JP Morgan and a number of regional banks took a hit along with the rest of the financials, but their stock declines weren't NEARLY as poor as BofA, Citi, WaMu and Wachovia. This is because their losses (or reduced profits, in the case of US Bank) weren't as heavy comparatively speaking.

Check the stock history, and you'll clearly see this.....which is REALITY. And then check the stock quotes of Citi and BofA. Big difference. Obviously, you didn't take the time to do so, which is demonstrated by your lack of hard facts.

1) Selective amnesia. Try a company like State Street Bank, one of the top 9 financial companies involved in the original TARP discussions. They had nothing to do with the bad loans, mortgages, or derivatives that were causing the panic, and their stock price got killed. If a company with little to no exposure lost 4/5th of its value, what would happen to companies that DID have that exposure once that info hit the press? Answer - they'd be out of business. It was only a matter of time, and there's precedent for this in the run on banks of the 1930's.

2) Banks are interconnected. If you lended a billion dollars in CP's to a company that went under, guess what - you're $%&^ out of luck collecting that. Now 5 of those banks went under, and suddenly your "strong position" looks a lot more tenuous. That's why Lehman's collapse caused such widespread problems. Multiply that by however many banks you would have liked to have seen fail and watch them take a lot of others with them. The idea that banks exist in a vacuum displays an amazingly simpleminded opinion of how things actually work, and I'd invite you to spend more time in your studies before commenting further on something you're having trouble grasping.