Mouth 2 Mouth

Hi Caleb

The bill does not look good and they are trying to rush the bill though as it stands right now we should vote no.

Good luck and success

Lou Ludwig

Caleb,

I respect you as a person, but I must differ on your quest to filibuster a bailout.  Yes, we have been living in a leveraged society, but placing the blame on a political party is totally misplaced. 

We need relief from the mortgage constipation that is effecting the industry and will continue to effect other industries as well.

I believe the bailout will make a profit for the government (that's us) in the long run just as the Resolution Trust did not so very long ago.

IF you have a moment read Dick Lepre's evaluation of the situation at The $700 Billion Answer .

Best to you,

kk

Lou, thank you.

Kristal,  Thank you so for your opposition. I respect you so much for it.

I don't think this is a partisan issue however.  I've pointed out my view on the administration but it appears it is the Republican congress that is against this and the Dems that are supporting it.

We've been told this is supposed to provide confidence for the markets.  But this bill brings confusion.  The difference with the RTC was that the government had an obligation under it's insurance position. It's responsibility was to liquidate assets, not to buy them in the first place.

The problem with this proposal is it does not resolve the issue.  Deleveraging is taking place because the amounts of leverage that brought about all the credit we have now were far far to risky.  To the point were very small declines lead to huge losses.  There's nothing to sustain this level of leverage anymore and we will find ourselves right back here in a very short period of time.

Thank you.

I'm not for a filibuster, but I am glad to see Congress debating the items and the President calling the two candidates in for discussion. I agree this is not a time for partisanship.  I know I should be against a bailout, but I find myself hopeful something is put in place immediately to protect our system.  I've heard a lot of discussion about a 'bailout' not being fair to the taxpayers and the companies that aren't received assistance. 

Isn't Chapter 11 bankruptcy a bailout of sorts?  What about government-back SBA loans?  Aren't they low cost assistance for small business that are subsidized by taxpayers?  I think Congress is asking for some good modfications in this proposal and it needs to be fine tuned, but government assistance is really the only reason we need governement. 

I like your style and passion on this Caleb.

Caleb

I agree, the party is over. We have not gone down the road of alternative energy, even though electric cars were doing well, but killed by greed...see the documentary "Who Killed the Electric Car"?...that just being one piece of the puzzle, I am confused over this whole bailout, but your letter sounds heartfelt and makes sense!

Thank you for voicing your intelligent and well-thought out opinion!

Kristal, I disaggres with you and the $700Million answer. If the mortage is close to market value, then even private banks will buy those. But the problem is that those debts are BAD debts. It does not make sense to buy them. The government could easily create a program to help those boarding houses from becoming worse, thus to avoid a total loss of many houses. In this market, there are people who need a real loan much more than those irresponsible banks that care less about this country. Why would the government step in and help them?

Huiting, the fact that these are bad debts is exactly why the gov't needs to purchase them. They are the only entity that can hold on to them, while at the same time enacting measures to stem foreclosures, without suffering. People who need a loan will not be able to get one unless these 'bad' assets are unloaded from the balance sheets of banks and investment firms. It's all one big, interrelated circle. We can cast blame on everyone, but we are beyond that point. What would happen to credit markets if this does not happen? No one knows, but it is the most serious economic crisis since the 1930s.

Caleb, You can be mad about this as much as you want, but your opinion does not matter (nor does mine). Congress has heard from agnry constituencies and they are still moving forward with this plan. Like it or not, it's going to happen.

This is one of those gambles in life that one can not take lightly. IF the companies are in the shape that is claimed, the disaster will be beyond imagination.  There always has to be a flow of money in the financial sector.  Should these companies collapse, the flow of money is dramatically altered and there will be a trickling effect throughout the entire financial industry with no means of stopping it as there will be very little money being circulated.  Thus, real estate, business, car, and other loans come to a halt. Then those businesses fail and the trickle gets worse and worse until a total collapse of the economy. 

We all agree that massive corruption in government created this mess, but it is here in front of us; thus we have to deal with the corruption later....hopefully.  So is the problem as bad as stated?  There is the big gamble.  Do we call them on this and see where the cards lay?  If they are distorting the truth, then we win.  If they are telling the truth, we go into an economy we have never seen.  I can not see taking a gamble of losing what I have set up for myself and family.....and would cry to see my country crumble to pieces.

My biggest concern is the next step of finding the corrupt government individuals that allowed this to happen with out saying a word.  We were warned in '03 and in '05 and the Congress stood their ground on this.  Why?  Great question.  This is corruption at it maximum.  So who will stand up and fight for us. Bush has not.  The congress wont as it is their tail that is on the line.  Which of the two candidates will.  McCain claims he will, but will he.  Obama is backed by the majority who are backing him, so he has zero motivation.  It is pretty darn scary....and it involves both parties as this was around when republicans were in charge, and the last two years when the democrats were in charge.

I would not compare this to Iraq or FEMA.  Iraq was a grotesque error.  The FEMA disaster was a state and local authority disaster; a pure lack of authority.  It is quite interesting that we have done better in such situations before the creation of such government agencies.  That is when neighbors helped neighbors.....which still happens, but when you depend on the government as your neighbor, you are just asking for disaster.  I wish FEMA did not even exist and let the states and local government handle their own matters.  Here in Texas, we do not need FEMA or any other such agency; we can handle any disaster on our own.  Your whole premise revolves around too much government control that creates disasters.  The more you want government control, expect more disasters.   That will never change.

Granted Caleb I thought you were MIA for a long time, heard about you and always wanted to read your new posts for a while wasnt until recently when you got back in the swing of things with your passion in new posts regarding the financial crisis we are having.  Its admirable to see your strong passion and devotion and making some changes and getting your voice heard.  Regardless if we are on the same paths or not, stay true and keep on with your goals!

Caleb,

It is these differing opinions that hopefully bring about understanding, respect, change.  It is about sorting out solutions, not jumping to temporary bandaids and on that I agree with you.  I don't have a background in finance, nor have I studied the credit markets, but seriously...if you were in real estate even in 2001, you had to have started seeing the signs.  Buyers with 0 credit and no money buying up the town en masse....I sat in my attorney's office blinking at the contracts and the signed loan documents at closing and said, "There will be massive foreclosures, there can't be a doubt and the whole fallout will be tremendous".  Not a revelation from a student of bailouts, bankruptcies, credit markets, or economic cycles....

Just some observation and what I thought was common sense.

The answer, a full on bailout...hmmmm.  I don't have the answer but the rush to throw good money after bad does concern me.

The house of cards had to fall at some point, it wasn't real to begin with, What we need is real.

I think it will pass in some form or another. Unfortunately no one knows the end result of it. I think it is just at most a very expensive band aid for a real big boo boo. :)

Caleb - I don't think the government should have made any of the previous "bailouts" much less this one. Disaster if they don't? Yes. But short term disaster, it's over, it's done, it shows that actions have consequences. From the bottom we can start up. I think the bailouts are just prolonging the agony.

Hey my friend Caleb,

There is money somewhere out there and I'm wondering who is spending it. Come on...print more money...print more money.

Caleb- I'm against it as well... not exactly for the same reasons or with the same passion. I do feel though that we're dealing with a math problem here... and it's being pushed politically... so many items in the proposal are just odd.

Joe, Thank you. I appreciate your thoughts.  In my opinion the current proposal will prop up the system for a short time, only for us to see a harder fall later, in the near future.

This proposal attempts to handle the symptom as opposed to the disease.  Leverage and transparency must be addressed before anything else.

Chapter 11 allows for things to unwind and for debts to be settled that's necessary for our economy, but Chapter 11 is not a bailout in my opinion. 

Please keep in mind that I am not anti government.  Hell I'd like to be in it.  But this solution has come to from a narrow, myopic position, that will do more harm than good.

Thank you Deborah.  My reason for focusing on the energy issue is because I wanted to focus on the difference between an economy with fundamental growth, and an economy that has its growth founded in finance.  Finance may show a growing GDP, but an economy that has relied on finance as ours has for some time eventually finds itself in trouble, just as I would if I'd relied on my credit cards for growth.  Finance is a piece of a healthy economy, but it should not lead.

Huiting,  You bring up a good point about the market value of mortgage securities and debts.  With greater transparency, and an opportunity for purchases to take place, things could begin unwinding, but transparency is paramount.

John,  Thanks for your comments.  I do believe a greater problem is that many of these banks are leveraged to a point that is unsustainable.  We are at a point where these banks cannot lend, not because these bad debts, but because they are so over leveraged they cannot sustain even the smallest of losses.

"Like it or not, it's going to happen." Unfortunately I feel the same way, I feel it's unlikely I'll be able to change things.  But I've been contacting representatives every day.  I hope we can slow down and look at what's really going on.  There are too many better alternatives to focus on the Bush-Paulson plan.

Tom Moncrief  "This is one of those gambles in life that one can not take lightly."  I agree with you on this.  Which is why I say we are moving too quickly.  

I understand the consequences, and the troubles this economy faces.  But the resolution being put for is not an appropriate solution by any means.  Regardless however, the terrific expansion in credit over these last few years is untenable.  This bill will likely delay a contraction, but it cannot sustain things for long enough to prevent a contraction.

It is clear from watching the statements of congress that they have no idea how to handle this issue.  In the words of Harry Reide "nobody knows what to do."  So they've followed the Paulson line.  While many others more prudent ideas are, for the most part, being ignored.

Thanks Justin!  One thing I am glad for, with ActiveRain, or at least this post, is that people are perfectly happy to disagree in an open discussion.

Rebecca Levinson.  THANK YOU.  You've said it better than I have.  I hope everyone has gotten the chance to read your comment.

Missy, I agree no one knows and it will pass, so far the form isn't all that different than the initial proposal.  But there are clear signs that there are terrible problems with this plan, and some of the consequences are clear.  While deflation is necessary, they're going to try and inflate our way out of this, which we've seen in the past, is a very loosing proposition.  History points to the error of fighting with inflation.

Sharon, Again you're saying it better than I have.  The bailouts are going to delay and worsen the agony that we're facing.  We can't prevent this problem from resolving.

Neal!  Ha!  Thanks for throwing some humor into the discussion.

Chuck.  "Just odd."  Yup.  I hope more people read it.

Thank you everyone.  Regardless of your opinion, for or against, this proposal may be one of the most important measures being pushed through our government in a long time.  I encourage you to read the bill, or at the very least read about it.  Try to understand things like credit expansion this economy has seen.  Try to understand the leverage problem.  If you're really into it look at the insurance/derivatives issues we are facing.

There is a huge lack of understanding of these matters by our representatives, and in this case, we cannot rely on them to make these decisions for us, not yet.

I agree, the "debt party" has eroded our economy but outside of imposing stricter Government regulations for Wall St. what really would be the solution? Do nothing? I am asking because I do not know the answer.

Thanks Deborah.  There are many alternative solutions. My main hope is that we take more time to consider them, because I view the current proposal as disastrous.

My personal view is that regardless of what happens there is a problem with our system.  That problem has got to work itself out.  Work can be done to facilitate a more orderly de-leveraging process.

There is a lot of investment sitting on the sidelines, unsure of where to go because on the one hand, a tremendous level of opacity makes it impossible to see where to invest and how much.  Opening things up, enforcing current transparency standards and standardized accounting principles will create a space in which investors can more confidently invest.

That's a start, but there's a long list of alternative solutions.  Matt has place a few on his post here I'll add this one in Why Paulson is Wrong. Those proposals all give us a start to look at the problem.

We're being pushed into something that's being perceived as necessary because we're facing a crisis.  But they're not saying that the crisis exists regardless of this plan.

WE HAVE SUCCESS!  THANK YOU!  It's not over, but it's amazing that we were able to do this much.