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The Bailout Plan

The question is who's keenly watching from the sidelines? In a way, I'm sort of happy that all of this is happening while I'm still in college so I didn't get smacked with the tsunami personally.

But in the meantime, I'm keeping up on the news and staying watchful for any developments. The more the Dow drops while company fundamentals remain solid, the more ridiculous the bounce back up once this mess gets cleaned up (and it always has--and always will). After Black Monday, the market recovered in short order IIRC.

In the meantime, none of us are going to die in five weeks because some pieces of paper are worth slightly less than before. I don't think the politicians (dumb as they may be) will let the bottom fall out.
 
Andy said:
At the end of the day, we are witnessing the single day largest drop of Dow in history...
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This is not really true. On Black Monday, the Dow went down 22.6%.
 
I don't think the politicians (dumb as they may be) will let the bottom fall out.
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You keep calling the politicians dumb and imbecile, I think they are way smarter than you think. Hopefully none of these comments come back and bite you in the future.
 
alain said:
You keep calling the politicians dumb and imbecile, I think they are way smarter than you think. Hopefully none of these comments come back and bite you in the future.
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Any rational person would move heaven and earth to prevent a depression. A lot of these politicians are voted in by people who wouldn't be able to understand finance if it smacked them in the head.

This is the dark side of democracy. No matter how much of an idiot you are, if you're over the voting age limit, your vote still counts as much as James Simons's.

And in order to garner the votes of the stupid, the politicians will abandon their posts as the defenders of last resort of the country.

Everybody is decrying the corruption of the Wall Streeters--what about the politicians, who are entrusted by the people to do the correct thing in order to improve the livelihoods of the voters, when all the care about is their own seat of power?
 
I don't see why those bank's CEOs and senior executives can have such lucrative remuneration packages after all they have done to the society. Don't they have to be responsible for what they have done? If they have wrecked the financial system, they have to pay to fix it, not the taxpayer. They can't just take the goodies and leave the responsibility for the mess they have created to the people under
 
alain said:
You keep calling the politicians dumb and imbecile, I think they are way smarter than you think. Hopefully none of these comments come back and bite you in the future.
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If the likes of Pelosi, Reed, and umpteen others were smart, they wouldn't have let the situation build to this. I saw Pelosi being interviewed last week and the look in her eyes was utterly vacuous and bewildered. Take it from me that they haven't the foggiest idea of what's going on and what needs to be done. The exceptions might be some of the people on relevant select committees.

The politicians are reacting to popular outrage from both conservative and working class constituencies. For the former, it's seen as yet more big brother government, with the state saving a number of unscrupulous financial fat cats ("socialism for the rich"). For the latter, it's seen as another addition to the federal debt burden that has to be paid by the nation as a whole -- while the profiteers skulk away to their yachts and offshore accounts.

But while the politicians are reacting to popular discontent, they haven't come up with something to take the place of the neoliberal regime (RIP) of the last thirty years. Events are moving too fast and politicians don't have those kind of smarts (they're smart only in equivocating, prevaricating, and marketing themselves).

What's clear is that the neoliberal regime of unregulated financial markets -- egged on by the likes and supporters of Milton Friedman and Ayn Rand -- is in the grave. If it isn't in the grave, then the US government should step back and follow Friedman's logic to the bitter end: let the banks go under and let the economy go into a convulsive coma: that's the way "free markets" are supposed to operate and by Friedman's logic, will ultimately recover to a more robust and dynamic equilibrium. The bailout package means either the US administration doesn't trust Friedman's analysis and prognosis and/or doesn't have the cojones to let the "free market" take its course (cynics like myself think the market never was "free" but always depended on state support and intervention). Whatever the case, state intervention demonstrates that "free market" ideology is dead and buried. What will takes its place, I don't know.
 
doug reich said:
Alain made the same point immediately after me. "Nominal", as in the amount in which the index is quoted, not in value or percent.
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Right. Thought it also contained the idea that the nominal drop was somehow less significant. I see that's not the case.
 
No, I wasn't passing judgment on how this was an insignificant event, if that's what you mean. Overblown, perhaps, but not insignificant.
 
I'm ambivalent now. Trichet is insisting the US pass the plan. Of course, that's enough motivation for congress -- they can't do it because it's workable, they can only do it if it pleases Europe.

But for reasons that have taken decades to form and would take too long to explain, my sense is that when foreign central bankers start telling the congress -- through a compliant media -- how to run its house, it's time to hang on to your wallets.

This is no reflection on anything or anyone other than the nature of power, politics and the media.

***

This is too cereberal. The real truth is this: when everyone who's money isn't on the line is trying to get you to do something, you might wish to consider your alternatives.

***
I realized there was ample opportunity for this to be misunderstood, hence the disclaimers peppered throughout. I'll chalk it up to "artistic license" and endure the misunderstandings, if there are any.
 
It's silly to say that their money isn't on the line. European banks are knee-deep in US consumer and corporate credit, which means that a good deal of that money currently sitting in the wallets we're hanging onto was theirs in the first place.

The Senate will almost certainly pass the deal, but I'm still no fan of it, despite the fresh layer of lipstick they've slapped on (no offense meant). I keep getting the feeling that the cash, when it is delivered, will have arrived just after the wave of sell-offs, consolidations, and bankruptcies have already done what needs doing.
 
bob said:
It's silly to say that their money isn't on the line. European banks are knee-deep in US consumer and corporate credit, which means that a good deal of that money currently sitting in the wallets we're hanging onto was theirs in the first place.

The Senate will almost certainly pass the deal, but I'm still no fan of it, despite the fresh layer of lipstick they've slapped on (no offense meant). I keep getting the feeling that the cash, when it is delivered, will have arrived just after the wave of sell-offs, consolidations, and bankruptcies have already done what needs doing.
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Yes of course there's money on the line. Their taxpayers will benefit from the price ours will pay. It's tacit acknowledgment of our leadership in markets that such a remark would emmanate, even if it has a whiff of indignation, guilt, and presumption about it.
 
Expanded Bailout Package Passed By Senate with 74 to 25

Apart from the Troubled Assets Relief Program, the bill passed by the Senate also includes:
Extensions of the AMT patch, tax deductions on state and local sales taxes, tuition, teacher expenses and real property taxes and tax credits for business research and new market investors
Energy tax credits and incentives to encourage wind and refined coal production, new biomass facilities, wave and tide electricity generators, solar energy property improvements, CO2 capturing, plug-in electric drive vehicles, idling reduction units on truck engines, cellulosic biofuels ethanol production, energy efficient houses, offices, dishwashers, clothes washers and refrigerators, and fringe benefits for employees commuting by bicycle.
A requirement for private insurance plans to offer mental health benefits on par with medical-surgical benefits
Tax relief provisions for victims of this summer's Midwestern floods, and Hurricane Ike
Freezing of deductions for sale and exchange of oil and natural gas, mandatory basis reporting by brokers for transactions involving publicly traded securities and an extension of the oil spill tax

But it also extends the following tax provisions:
Economic development credit to American Samoan businesses
$10,000 tax credit for training of mine rescue team members
50% immediate expensing for extra underground mine safety equipment

Attached there is the entire amendment.
Tax credit for businesses with employees from an Indian reservation
Accelerated depreciation for property used mostly on an Indian reservation
50% tax credit for some expenditures on maintaining railroad tracks
7-year recovery period for motorsports racetrack property
Expensing of cleaning up "brownfield" contaminated sites
Enhanced deductions for businesses donating computers and books to schools, and for food donations
Deduction for income from domestic production in Puerto Rico
Tax credit for employees in Hurricane Katrina disaster area
Tax incentives for investments in poor neighborhoods in D.C.
Increased rehabilitation credit for buildings in Gulf area
Reduction of import duties on some imported wool fabrics, transfers other duties to Wool Trust Fund to promote competitiveness of American wool
Special expensing rules for film and TV productions

And there's more:
Increasing cover of rum excise tax revenues to Puerto Rico and the Virgin Islands
Making it easier for film and TV companies to use deduction for domestic production
Exempting children's wooden arrows from excise tax
Income averaging for Exxon Valdez litigants for tax purposes

(WSJ)
 

Attachments

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What the hell?! What do those provisions have with the current bill? Well, it's as the 17-year Wall St. veteran said today...when you see a bill bound for passage, you just throw a bunch of baggage on it that gets passed through anyway.
 
They're called riders, and it's the primary MO of our elected representatives. I believe another name for these things is "earmarks".
 
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