Gov Bailouts
 

I was just wondering how the government will react if an airline faulters will there be a government bailout like with Bear-Stearns and AIG?

An airline is not worth a fraction of Bear Stearns or Lehman Brothers.

Don't count on a bailout.

The NWA/DAL merger is worth what, $17 billion? The swing loan granted by the government to AIG today was for $85 billion.

Those firms affect FAR more Americans and FAR more money than a measly airline.

Between GM and AIG, I wouldn't be suprised if the gov't bailed out the airlines (see Sept. 01).... the mortgage bailout.... whose next?
... maybe the shareholders who lost 13% recently..... maybe we can bail out everyone... that ought to keep the economy stable:rolleyes:

The talk always sounds good. Laissez faire, less regulation, hands off business. Then all of a sudden, the largest mortgage broker is gone, the gov is bailing out Fannie Mae and Freddie Mac to the tune of 100B each if need be. And now 85B for AIG. I wonder if a little more regulation could have prevented this? Eight years of failed policy culminating in one big bill for the taxpayer. Fiscally responsible my arse.:eek:

THANK YOU

finally someone who sees it as I do, and isn't blinded by the republican machine of "everything is fine, and George W. did a good job"

My favorite part about the bailout is that it equates to corporate welfare for a company run by republicans who vote against welfare.

Hypocrisy in action.

What is good for the goose should be good for the gander. If you vote against welfare for those who run into hard times then you should not expect any when it happens to you.

Exactly and the bailouts are BS too....What happened to letting the free market economy run its course?

The people who ran freddie and fannie are now working for Obama as advisors and running mate vettor

Freddie Mac and Fannie Mae were created by Congress.

That is funny Bill Clinton had more to do with what's going on with the Banking industry and mortgage banking, you need to check your facts.


http://www.cnn.com/ALLPOLITICS/utili...ners/story.gif
Clinton signs banking overhaul measure

November 12, 1999
Web posted at: 3:28 p.m. EST (2028 GMT)

WASHINGTON (CNN) -- The biggest change in the nation's banking system since the Great Depression became law Friday, when President Bill Clinton signed a measure overhauling federal rules governing the way financial institutions operate.
"This legislation is truly historic and it indicates what can happen when Republicans and Democrats work together in a spirit of genuine cooperation," Clinton said at a White House signing ceremony. The event brought together the president and several Republican members of Congress who have been among Clinton's sternest critics -- a sign of the bipartisan support that eventually developed for the package.
Congress passed the bipartisan measure November 5, opening the way for a blossoming of financial "supermarkets" selling loans, investments and insurance. Proponents had pushed the legislation in Congress for two decades, and Wall Street and the banking and insurance industries had poured millions of dollars into lobbying for it in the past few years.

Ding Ding Ding!

We have a winner!

Lots of people at fault here, going all the way back to LBJ.

From the wikipedia (I know, but its the most condensed version) on the Community Redevelopment Act.

Basically lending money to people who can't pay it back is poor business, and the government shouldn't make banks do it under some misguided sense of fairnness.

Clinton Administration's Changes of 1995

The Clinton Administration's regulatory revisions [1] with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997. [2]

[edit] George W. Bush Administration's Proposed Changes of 2003

In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." [3] This change, which did not pertain to the Community Reinvestment Act, was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank(D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."

Fannie Mai was created by the Democrats and Democratic party. Just another form of entitlement and to obtain more votes for the Democrats. Sound familiar, because Obama is preaching the same BS now. Vote for me and I will give you a tax cut. Right, just go look back at history. 98% of the time Democrats will raise your taxes.

History
Fannie Mae was founded as a government agency in 1938 as part of Franklin Delano Roosevelt's New Deal to provide liquidity to the mortgage market. For the next 30 years, Fannie Mae held a virtual monopoly on the secondary mortgage market in the United States.
History
Fannie Mae was founded as a government agency in 1938 as part of Franklin Delano Roosevelt's New Deal to provide liquidity to the mortgage market. For the next 30 years, Fannie Mae held a virtual monopoly on the secondary mortgage market in the United States.

I smell another thread closure;)

Here is a little more fiscal responsibility for you:

U.S. National Debt Graph

What are you talking about? The reason they are bleeding money is because they bought up sub-prime motrgages. Do you want to know why they were lending sub-prime loans? No not because they are greeedy, Its because minorities were not able to get loans. So what does the govt do? Makes it where minorities can get loans for outrageous amounts, of course, and says we'll back the loans if they cant pay them. Well guess what most couldn't make loan payments, and now we are paying for it.

Fannie went public in the 1960's. Freddie went public in 1989. And now you know.....the rest of the story.

I certainly hope it doesn't come to that. I am asking everyone to refrain from the "vote for _____" type posts. Thanks!

without being for dems or reps, shouldn't taxes go up. we have increased our debt by 4 trillion to 9 trillion in the last 8 years. that's an 80% increase over that time. even bush 1 had to do it at the end of his term and he claimed "read my lips no new taxes"

Let's see, $5 trillion for the Fannie Mae and Freddie Mac buyout, $85 billion to AIG. This whole "their too big to fail" is a croc. If they are to big to fail why isn't the government breaking them up like Ma Bell. Mark my words, by failing to let the market take its course we have not had these corporations take responsibility for their actions. As a result, they can get into further trouble, perhaps even more expensive trouble than they are now and then what happens. I am amazed by the hypocrisy on the hill. The politicians were up in arms when DAL/NWA announced their merger. It was going to raise prices they clamored. We have to endure a DOJ review, etc. Bank of America buys Merrill and now controls a large portion of the financial system and their isn't so much a whisper of protest on the hill. Talk about to big to fail. Pathetic. Welcome to the capitalist society when we make profits and the socialist society when we take losses. What I'm curious about is if the government is run by the people, if AIG makes money, how does that go back to the taxpayer?

Quote

What I'm curious about is if the government is run by the people, if AIG makes money, how does that go back to the taxpayer?

ENDQUOTE

Cuz the FED will own 79.9% of the shares of AIG ... that's a pretty big voting block which could and should cause the board of directors to pay a large amount of profit in dividends. On the other hand, while AIG pays back the bridge loan at about 9% interest (I don't pay that much on anything) there's a profit for the FED and if AIG becomes profitable and well healed, the FED can sell it's majority shares.

It it works it's good. If it doesn't, is more good money poured down the hoss hole after bad.

TransMach

ding, ding, ding...

You mean this bill? That was Banking Committee Chr. Phil Gramm's baby. He worked on it for years and was the chief sponsor. It passed the Senate 54-44 mostly among party lines. Guess what McCain's vote was? Clinton threatened a veto, but later signed the bill after certain compromises. Here is the story.

WASHINGTON - Sweeping legislation that would let banks, securities firms and insurance companies merge to create big financial "supermarkets" has pushed through the Senate.

The bill would lift Depression-era legal barriers separating the three industries, allowing the new companies to sell consumers everything from checking accounts to car insurance to mutual funds.

It includes a provision that would make it a federal crime for anyone to misrepresent himself to obtain someone's private financial data.

The mostly party-line vote yesterday was 54-44 on the bill, which faces a likely presidential veto if Congress sends it to President Clinton without changes. Sen Slade Gorton, R-Wash., and Sen Patty Murray, D-Wash., voted along party lines.

The Clinton administration supports the legislation in principle. But in a showdown with Senate Banking Committee Chairman Phil Gramm, R-Texas, it has threatened a presidential veto of the bill unless there are major changes, including the removal of provisions that Democrats view as an attack on a 1977 community-lending law that requires banks to make loans to poor and minority residents in the areas in which they operate.

Proponents of the financial overhaul legislation, led by Wall Street and the insurance industry, maintain it is needed to keep the U.S. financial industry competitive in global markets and it would save consumers millions by providing one-stop financial shopping. The financial industries have spent millions lobbying for the legislation in recent years.

A financial overhaul bill more to the administration's liking recently cleared the House Banking Committee and is being reviewed by the House Commerce Committee, which has given it a lukewarm reception.

Treasury Secretary Robert Rubin and the administration want to let banks get into new kinds of financial activities through subsidiaries of the banks themselves, not just through affiliated companies within the same parent holding company. That arrangement would increase the power of the Treasury's Office of the Comptroller of the Currency, regulator of nationally chartered banks.

Federal Reserve Chairman Alan Greenspan and most GOP lawmakers, on the other hand, want to let banks diversify through a holding company structure. That would expand the independent Federal Reserve's role as a regulator.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

I'm sure AIG will be doing everything they can to pay back this loan sooner rather than later.

Completely different setup. Bear Stearns, AIG, Freddy and Fannie all were the basis of our economy.

To be fair don't let the FED fool you into thinking they bailed AIG out. They just gave them 85billion as a loan where AIG is then required to sell 80% of its assets overtime. The AIG boost should have never happened. It would have been better to let them go BK. Look at what happened to LEH. Go BK and let others pick up the assets for fractions of what it would have costs. The Fed only hurt banking by giving AIG the loan and it hurt the reputation of the american banking system which is why we saw a 450 point drop today. Reputation is everything right now. A key reason the feds kept the interest rate at 2%. When they DIDN'T lower it the market jumped quite a bit because foreign money started flowing in. It meant inflation would be curbed and that the industry was more stable. This is all just thinning of the heard. AIG is not deposit based which is what pushed the great depression. They didn't have a reason to be helped by the fed. Read my signature. Socialism at its best.

Hey guys thanks for the all the info and thanks for keeping the politics out of it.

AIG is not required to sell 80% of it's assets. They have to repay the loan plus interest within 2 years. They have $1,049,876,000,000 in total assets. That's with a T!

It's funny how your own arguement makes the point for the opposition. The reason that companies like Fannie and Freddie failed is the EXACT reason you espouse to be the downfall. Government regulation was the cause for their failing. The were backed by the federal government with no fear of failure despite the bad loans they wrote. If the companies were left alone in a pure market, they would not have made most of the failing loans that were made because they would have actually had fear of failure. They knew they had no fear of failure because "the gov't could not let us fail."

Do not try to tell me that more regulation is the answer. Almost every industry in this country with heavy regulation runs inefficiently and has to be bailed out with taxpayer money consistently. But, I guess you like how Medicare and Social Security are being run...

You just make yourself look ignorant with this diatribe. Fannie and Freddie were run by top Democrats for the longest time. I do not think that there were not Republicans that could have done more to try to fix the messed up system, but whey don't you see who actually benefited financially the most... The party starts with a D, not an R.

Yeah,
This just started 8 years ago. This crap has been going on since the late 70's with both parties running the show.

Scoop

And Bear Stearns? AIG? What says you about their bailouts? Were they not in "pure" markets?

Yeap, 20 out of the last 28 Republican:o

Yeah, it was Clinton's entiltlement program!
 

Ding, Ding!!!

CLINTON ERA EXPERIMENT CAUSE OF CURRENT MARKET MELTDOWN!

The Real Culprits In This Meltdown
By INVESTOR'S BUSINESS DAILY | Posted Monday, September 15, 2008 4:20 PM PT

AMERICAN'S REFUSE TO PUT ANOTHER "SON OF CLINTON" IN THE WHITEHOUSE IN 09'

Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it.

Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

Yes, the market was fueled by greed and overleveraging in the secondary market for subprimes, vis-a-vis mortgaged-backed securities traded on Wall Street. But the seed was planted in the '90s by Clinton and his social engineers. They were the political catalyst behind this slow-motion financial train wreck.

And it was the Clinton administration that mismanaged the quasi-governmental agencies that over the decades have come to manage the real estate market in America.

As soon as Clinton crony Franklin Delano Raines took the helm in 1999 at Fannie Mae, for example, he used it as his personal piggy bank, looting it for a total of almost $100 million in compensation by the time he left in early 2005 under an ethical cloud.

Other Clinton cronies, including Janet Reno aide Jamie Gorelick, padded their pockets to the tune of another $75 million.

Raines was accused of overstating earnings and shifting losses so he and other senior executives could earn big bonuses.

In the end, Fannie had to pay a record $400 million civil fine for SEC and other violations, while also agreeing as part of a settlement to make changes in its accounting procedures and ways of managing risk.

But it was too little, too late. Raines had reportedly steered Fannie Mae business to subprime giant Countrywide Financial, which was saved from bankruptcy by Bank of America.

At the same time, the Clinton administration was pushing Fannie and her brother Freddie Mac to buy more mortgages from low-income households.

The Clinton-era corruption, combined with unprecedented catering to affordable-housing lobbyists, resulted in today's nationalization of both Fannie and Freddie, a move that is expected to cost taxpayers tens of billions of dollars.

And the worst is far from over. By the time it is, we'll all be paying for Clinton's social experiment, one that Obama hopes to trump with a whole new round of meddling in the housing and jobs markets. In fact, the social experiment Obama has planned could dwarf both the Great Society and New Deal in size and scope.

There's a political root cause to this mess that we ignore at our peril. If we blame the wrong culprits, we'll learn the wrong lessons. And taxpayers will be on the hook for even larger bailouts down the road.

But the government-can-do-no-wrong crowd just doesn't get it. They won't acknowledge the law of unintended consequences from well-meaning, if misguided, acts.

Obama and Democrats on the Hill think even more regulation and more interference in the market will solve the problem their policies helped cause. For now, unarmed by the historic record, conventional wisdom is buying into their blame-business-first rhetoric and bigger-government solutions.

While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

Market failure? Hardly. Once again, this crisis has government's fingerprints all over it.

I was Pres Clinton's Air Force Aide and carried the nuke football for two years. Don't get me started on his legacy...or lack thereof.

Right. IBD is an independent, bi-partisan source. Next you will be quoting Brit Hume.:) I think maybe corporate greed did more to create the subprime mortgage market than Pres Clinton. Nobody at Lehman was raising concern when the profits from high interest subprime were rolling in. It's amazing how whether it is terrorism or financial meltdown, it is always Clinton's fault.

"That's great, it starts with an earthquake, birds and
snakes, an aeroplane and Lenny Bruce is not afraid.
Eye of a hurricane, listen to yourself churn - world
serves its own needs, dummy serve your own needs...."

I don't know how 'pure' their markets were, but a gov't bailout just ruined the market force of failure that keeps the next big company from making the same bad investments that they did. A gov't bailout definitely takes the purity from the market.

All,

If you are a true conservative then you should be just as repulsed as anyone at what has happened in the past seven years. Bush has printed more money than any other leader in history. He has borrowed more money than at any other time in history and our true national debt is closer to 11 trillion although it is officially 9.7 T. (Please don't confuse our national debt with the trade deficit.) The more money the Fed prints the more the U.S dollar is devalued. While Bush did cut our taxes, and yes all tax cuts are a good thing econ 101, however printing money is a back door tax. I.E if you bought 500 dollars worth of groceries in year 2000 those same groceries today would cost 1200. Just look at the dollar compared to the euro from just six years ago. Please google John Snow and Paulson views on the weak dollar to help multi-national corporations export out of the U.S.

By weakening our currency and the 2003 tax breaks/incentives to outsource jobs to help the Multi-National corporation's bottom line, have had a dramatic effect on the American worker. Read closer and you'll see it is not just the subprime that is the problem but it's multi-faceted in that it is credit card payments, car payments, and commercial defaults.

Ergo, the Henry Ford model, good paying jobs create good paying jobs. The race to Walmart wages creates what? That's right people not being able to pay their mortgage etc.

I have been and always will be a conservative but for those that believe that the Republican party wants any part of fiscal conservativism are misguided. This group of republicans have balloned our government to an unbelievable size, spent money like a drunken sailor and now that our country and financial systems are broke they want blame policies of ten years ago. Well, ten years ago people were paying their mortgage.

If you are going to vote for McCain, don't go around saying that you're voting for a fiscal conservative or a conservative at all, just be honest and say you would vote for anybody with an R by his name over a democrat.

Political. Threads get locked when the discussion starts suggesting how to vote.

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