ONE TRILLION BAILOUT? Give me a Break!!

Personally, I think the media is using these enormous figures as a way to terrify voters into voting for the Democratic social policy being proposed.  I agree, there must be a least 1% recovery-which makes the estimation wrong at base- if not 70% which is where we were after the S&L crisis(the gross debt from that was $160 million).  If we look at the early 1980's when the dollar climbed out of recession and doubled the Pound, I hope that is the swing we will see in the 18 months post inauguration.  And the trillions will be diminished to the $400 million, that inflation would indicate from the last economic cycle, it will take to put our economy right, ya' gotta' love the hype.

Depending on how they deal with this "bailout", we may eventually come out of this with a profit. If the Bailout is run like Resolution Trust- we're toast.  Either the dollar will de-value even more and/or we'll be handing over a significant part of our financial freedom to the Chinese.

However- if the situation is dealt with like we dealt with Chrysler- then we'll make a profit.

I personally think with the business heads we have in the administration- these guys are salivating over the potential revenue this "bailout" could generate.

The only thing missing from your post is the word "media" stuck to the pictures forehead.  I am glad to see that I am not the only one sick of hearing about the tax payers having to bail out the banks.  The government has to step in because of the lack of guidance that they gave these companies and hold on to their loans until the market recovers and these loans can be resold.  We will be paying for it, but not like we would if they stood by and did nothing...Thanks for the post...Jason

Keeping their mouths shut even when they get their facts straight would be fine with me.  They should release a story when they have news to report, not opinion to give.  They should let the public forums take care of the opinion, or become editorial writers...Thanks again for the post...Jason

Great post David. The fear mongering by the press and the posturing by polticians has made this uneasy moment into a crisis. it sgould be called an injection of capital into the mortgage securities market to make it more liquid.

If the goverment buys the mortgaged backed bonds at .65 cents on the dollar, 20% of the dollar volume of mortgages get foreclosed on , and the underlying properties get sold for 40% of loan value. ($1-(.20*.60) = $1 -.12 =.88) . That is a worse case scenario .23 cent capital gain. Figure they sell treasuries to fund at 4% and get 10% yield on the discounted mbs (6% annual to the good)

How can this be bad. Congress needs to get its head out of its rectum and make this deal it is the only profitable one to do. Because if they fart around all of the upside will be taken out with political schemes.  They need to strike while they can still get good discounted assets.

Al that is needed is make the mortgage back security market liquid again.

Did you also notice that they want to increase the national debt limit from abot $7 trillion to about $11 trillion. The money for the bailout is going to come from the American taxpayer, it's going to come from foreign countries absorbing our debt.

The government might be able to bail everyone out this time with debt, but there might come a time where we need someone to bail out our government. At that point, OPEC, China, or possibly a member of OPEC might be our only help. We could become a satelitte of China, or a fiefdom to Saudi Arabia's kingdom. Finally, the religious political extremists would have their religious theocracy in America, just not the one they were hoping for. LOL

Them darn foreigners are already buying everything. Remember Anheuser Busch, formerly an American icon?

David, I remember the outcry when the Japanese bought Rockefeller Center. Then after owning it for a while they resold it at a significant loss. Very similar to now. Foreigners bought our Mortgage Backed Securities now we will buy them back for 50 cents on the dollar. Hard to believe that this keeps happening.

Bill Roberts

I find it amazing that nobody seems to have notice d that 630 billion was infused into the banking system DURING the bailout hearings.

Fed Pumps Further $630 Billion Into Financial Syst

Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

``Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode.''

The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

European Rescue

European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor's 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

``If people think the authorities may give in to fears, they are wrong,'' Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. ``There is willingness and determination on winning the battle to restore confidence and stability.''

Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn't be repaid by counterparties, driving up the cost of short-term loans between banks.

Funding Risk

``By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,'' the central bank said.

The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.

All the banks extended their facilities until the end of April 2009.

The Fed is also increasing the size of its three 84-day TAF sales to $75 billion apiece, from $25 billion. That means the Fed will make a total of $225 billion available in 84-day loans. The central bank will keep the sales of 28-day credit at $75 billion.

Special Sales

In addition, the Fed will hold two special TAF sales in November totaling $150 billion so banks can have funding available for one or two weeks over year-end. The exact timing and terms will be determined later, the Fed said. The TAF program began in December, totaling $40 billion.

The bank-rescue plan being debated by Congress today would give the Fed more power over short-term interest rates by providing authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions. That would make it easier for the Fed to pump funds into the banking system.

Paying interest on reserves puts a ``floor'' under the traded overnight rate, which would allow a central bank ``to provide liquidity during times of stress'' without affecting the rate, New York Fed economists said in a paper last month.