The US Economy

[Totally bored]

My wife and I have always worked hard for a living while raising 2 kids. We didn't buy a house that was to exspensive and live above our means. Dang house always need work but it's what we could afford at the time. My Car is 11 years old and my wifes car is 6 years old so we don't have any Car payments thank god. My TV is only 27 inchs but it's paid for. It's tough making ends meet at times and we try to not use our credit cards to get to much into debt. I always thought we where doing it all right !


Now they say on the News that my Family will have to pay 10,000 US Dollars to bail out people that bought big Houses, have massive debt. We need to bail out Banks that made a profit from all that and not to mention that we also need to help out Wall street workers that normally live life large.

It just don't seem right ????


Discuss !

[Iowegan]

The "Free Market" ain't free.

[elicross]

I don't think you can say the current crisis was caused by people who bought big houses, nor that the bailout is about helping them.

The crisis was caused by a philosophy that less regulation of the financial markets is always better, and that a free market will police itself and correct itself before it reaches a crisis point. That turned out to be incorrect, mainly because it didn't account for the extremes greed will lead people to, or the excesses a corporation is capable of when it's so large that no single person has to worry about bearing the blame for those excesses.

I'm sure some of the people who've been foreclosed on or had to default on their mortgages did buy big, luxurious houses they should've known they couldn't afford. But I think an awful lot of them were honest, hard-working people who bought modest houses because a "financial expert" told them they absolutely could afford them and because owning a home made more sense than renting.

At any rate, the original $700 billion deal put forth by the Treasury Department about a week ago was not about bailing out people who bought houses they couldn't afford, whether they did it out of greed or an honest misunderstanding of the market. It was all about saving these huge investment banks from going under, and it had no provisions for helping struggling homeowners or for limiting the money made by the CEOs of these huge, essentially failed, corporations.

That's what the week's negotiations in Washington have been about; working some elements of accountability and responsibility into the bill before it's passed. Hopefully the bill we've got today includes those elements. Because this bailout does have to happen in some form; if these enormous financial institutions were simply allowed to fail, it would badly hurt all of us -- not just the rich Wall Street types.

[dubya]

I don't think this can be discussed without getting personal, political, and getting someone banned from the forum.

My suggestion would be that if you are feeling powerless in this decision then make every effort to to vote, if you don't already, in November and let your actions speak louder than your words.

[Totally bored]

I don't think this can be discussed without getting personal, political, and getting someone banned from the forum.

I think we can.

[elicross]

Well, it hasn't gotten personal or political yet -- but I do agree: If you're really concerned about this crisis, the most important thing you can do is decide for yourself which candidates are most likely to be able to fix it and to keep it from happening again, then get out and vote for them. And make sure your friends vote, too. I think it's every U.S. citizen's duty to vote -- and to make sure they're as informed as they can be before they vote.

If you're not registered to vote, or if you know someone who isn't, be aware that time is running out. It varies from state to state, but I know in some places the deadline to register is early October, less than a week from today.

You can get info about your state and your polling place here: http://www.rockthevote.com/electioncenter/

[Cogs]

It's totally possible to discuss this w/out banishment.

[dirtdog]

My wife and I have always worked hard for a living while raising 2 kids. We didn't buy a house that was to exspensive and live above our means. Dang house always need work but it's what we could afford at the time. My Car is 11 years old and my wifes car is 6 years old so we don't have any Car payments thank god. My TV is only 27 inchs but it's paid for. It's tough making ends meet at times and we try to not use our credit cards to get to much into debt. I always thought we where doing it all right !


Now they say on the News that my Family will have to pay 10,000 US Dollars to bail out people that bought big Houses, have massive debt. We need to bail out Banks that made a profit from all that and not to mention that we also need to help out Wall street workers that normally live life large.

It just don't seem right ????


Discuss !

FWIW - Tb...you're doing the right thing, man, bad economy or not.

Suddenly Canada doesn't seem like such a bad place after all, eh?

We've been very buffered from the US meltdown since our financial institutions are much more rigorously regulated than in the US. Sure, we took our hits, but all of our major banks had relatively little exposure to the meltdown...my bank stock actually went UP!

What's worse: a little bit of government intervention every day or major government intervention when the house of sand collapses?

DD

[elicross]

I don't think Canada's a bad place. Some of my best friends are Canadian!

[phantomman]

Now they say on the News that my Family will have to pay 10,000 US Dollars to bail out people that bought big Houses, have massive debt. We need to bail out Banks that made a profit from all that and not to mention that we also need to help out Wall street workers that normally live life large.

It just don't seem right ????

BOHICA!*

(*an old slang military acronym......"BEND OVER HERE IT COMES AGAIN")

Whenever some congressional cheeze-dick or political pantywaist starts talkin' about "justice" what he really means is JUST US.

An' pore ol' Joe Six-pack ends up gittin' savagely sodomized no matter who is drivin' the bus.

[clayville]

The bus already left the depot, and if it goes over a cliff it's taking us all with it.

[Offshore Angler]

The solution is easy. Take the 700 billion dollars, divide it by the population and give every man, woman, and child their equal share. Watch the econony move then!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[stratcat55]

+1 It'll never happen though OA. Phantomman is right again.
What's screwed up is no one will go to prison for this situation.
Look out, it gets deeper. Automakers are looking for money to retool their plants for the new hybrid technology. They want the govt. to pony up some bucks to help. They don't want to keep the plants here for the American workers though.

Right or wrong, I'm a card carrying Libertarian and have been for about 20 years. Wasted vote? Depends on how you look at it. I'd rather vote for something I want and not get it rather than vote for something I don't want and get It.

This whole situation is as bad as I've ever seen it.Overrun by greed and tons of unethical business practices headed by a bunch of sleazy Assclowns . I'm self employed, if I don't run my business properly, I'm out of business with no one to bail me out.

[NTBluesGuitar]

I'm a card carrying Libertarian and have been for about 20 years. Wasted vote? Depends on how you look at it. I'd rather vote for something I want and not get it rather than vote for something I don't want and get It.

Great point. It's never a wasted vote. As a 'spiritually influenced' voter, there are specific guidelines I follow when choosing a candidate, and it doesn't matter what party the candidate is in.

This however does not obligate a vote for a major party nominee. The minor candidates for president serve as a "protest vote" for those who are completely dissatisfied with the above choices. "Protest votes" do count, and they are important. Though a "protest candidate" may have little to no chance of winning the election, a vote for him is a vote against the mainline political establishment. It therefore sends a message to that political establishment. When protest votes accumulate greater than 5% for any particular protest candidate, the major political party (Democrat or Republican) most closely aligned with that candidate "feels" the pinch. It hurts their party and can potentially throw a major election. Because of this, major parties pay particular attention to "protest vote" third-party voters when they clear the 5% hurdle, often adopting many of the issues these "protest voters" cite as important to them.

Anyway, the economic situation was something that was apparent in the late '90s. It's not like it just happened this year. These financial geniuses knew the risk back then and as the gambles paid off, the balloon got bigger and, unfortunately, it's bursting now.

My family decided long ago, to stop feeding the pig, and we played the credit card balance transfer game for the last 4 years. Never having an interest rate on our debt more than 0%. We never made purchases after that point. Within ten months, our consumer debt will be gone. All that's left is the mortgage (fixed rate), two last student loans, and phone/TV-internet/utilities. This means that the wedding, the furnture, the computer, and all that is paid for.

It's hard to do, but every month you get closer to the end, it's more encouraging. In light of this current crisis, I'm so glad we took the fixed rate mortgage instead of saving a half point for something else.

I don't blame the folks who bought the houses in a high-risk situation and can't follow through. I don't blame the government for trying to preserve some semblance of stability with financial infrastructure. I don't even blame the financial big-wigs for gambling in the name of profit.

In the end, this time in history will teach us and our children to think twice about what we do and how we spend our money. Even during the great depression, the same thing happened...my grandparents lived through it without any education and did just fine. I'm pretty sure those who step back and look smartly at things will also do just fine.

[stratcat55]

I don't really consider third party votes "protest votes". I have voted for democrats and republicans. I vote for who I think can do the best job at the time. The Libertarian platform makes sense to me and is as close as to what the Founding Fathers wanted as far as i can figure. Bob Barr is a pretty intelligent individual. The late Harry Browne was also an outstanding candidate.
The only debt we have is taxes. We worked our asses off and own our home, our photography studio and office and all the equipment in it. We also own our cars. They're old but well maintained.
It's hard for me to fathom what people think when they get so far over their heads financially. Some of these people as I understand it were lied to and now it's time to pay the piper. Unfortunately we all have to pay.

[rudutch]

me thinks we will be getting the shaft (again)
no one has explained the situation to my sastisfaction. I hear lot of conjecture, speculation and assumptions...

I want to screw up my job performance so bad I get canned and a multi-million dollar bonus to go with it........

can someone show me where to appy for one of those jobs?

[NTBluesGuitar]

I don't really consider third party votes "protest votes". I have voted for democrats and republicans. I vote for who I think can do the best job at the time.

I probably used the phrase "protest votes" a bit loosely. But I agree with your point. I vote for who best can do the job, according to my moral guidelines. I've voted Democrat, Rebublican, and even Green Party.

Point is, I think you and I are on the same page with that.

In regards to the bailout situation, I don't think it would matter who is in office. Joe Taxpayer will foot the bill. But for some situations, if it preserves the quality of life I want for my family, then I can accept is as long as my taxes don't go UP as a direct result.

Just distribution of wealth is not something that will be accomplished with government...period.

[stratcat55]

Be afraid..........Be very afraid....

[elicross]

In regards to the bailout situation, I don't think it would matter who is in office. Joe Taxpayer will foot the bill.

Yep. The damage is already done. It was done years ago, well before Lehman Bros., Merrill Lynch, AIG or WaMu failed. Now it's got to be fixed, and there aren't any options for fixing it that don't involve time machines or us footing the bill. As for whether or not people will do prison time behind this crisis, the FBI is investigating -- but there's really no reason to believe any of this was caused by criminal actions. There's been so little regulation on the industry that the behavior that created this mess was perfectly legal.

[phantomman]

Be afraid..........Be very afraid....

Ayup. Now's the time to be retirin' debt an' keepin' yer assets as liquid as possible. I'm fortunate in that I don't have a mortgage anymore an' no revolving credit obligations. But my portfolio's been circlin' the drain for the last 30 months or so, at least the stock an' mutual fund portion of it. I moved quite a bit into precious metals (ie: gold coin currency) last year when the handwriting on the wall finally swam into focus. Whatever comes, it's gonna be a huge sh*t sandwich an' we're all gonna hafta take a bite (whether we're hungry or not).

Bon appetit, me buckos!

[Cygnus X1]

A lot of pundits throwing bullets back and forth.
I'm just a kid by many standards (45) but I remember the 70's...
I paid attention.

What I learned was to take care of one's own personal economy.
We're doing fine. House paid for, vehicles, toys are kept within their own budget, and we only pay for labor that we can't do ourselves.
(People actually pay to go to the gym? Start working on that woodpile...it cures a lot of ills!)
Politics? I would vote Libertarian, but they fall off the cliff at certain key points for my taste. I take every opportunity to get in the face of my reps, and let them know how "we" want them to vote. Oddly enough, it seems to work in this neck of the woods. Face to face with these clowns can bring them back to earth, if only occasionally.

[MMP]

General Election = Time to rotate the thieves.

Why should we bail out wall street? Or the ailing banks or anybody else?
I grow tired of reading of failed bankrupt banks and companies who's CEOs walk away with multi-million dollar "bonuses" for running them into the ground. The president of WaMu was hired Sept. 7th and lost his job thursday night and walks out with an $8,000,000 bonus. What's up with that? I wish I made $8,000,000 every three weeks.

Maybe we need another depression to straighten out our economy.
My grandparents and parents both survived the last one. I think I could survive one too. ymmv.

[Cygnus X1]

On the other hand...and this is difficult to explain properly...
What about the government regulating to the banks about loosening lending procedures to encourage more home ownership? To the point that fines would be imposed if not enough of those loans were not given to the proper income level?

Some of that happened...combined with speculators jumping all over the opportunity to make quick money on that trend. It created a nebulous situation where it becomes difficult to pin the blame.

CEO pay is always an easy straw man...it was tried to explain high oil prices, but really it's a major league baseball game where the parties of both sides can compare it to the common man. It's a huge diversion, it's up to the stockholders, and it's ugly, but it doesn't mean much of anything in the end.

[elicross]

Why should we bail out wall street? Or the ailing banks or anybody else?
I grow tired of reading of failed bankrupt banks and companies who's CEOs walk away with multi-million dollar "bonuses" for running them into the ground.

The rescue plan the House will vote on tomorrow will only be open to companies who deny their executives "golden parachute" deals. They'd also be taxed heavily on any compensation to their executives over $500,000. So, assuming the bill passes, there won't be any multi-million-dollar salaries or severance packages for the CEOs of any firms it bails out.

Maybe we need another depression to straighten out our economy.
My grandparents and parents both survived the last one. I think I could survive one too. ymmv.

Show me a person who lived through the depression and thinks we should go ahead and have another one, and I'll show you a person who had it a lot better than average. There are already too many homeless, unemployed, and starving people as it is. Would it really be good for this country to have more?

[Totally bored]

Vote

Yes I vote but it seems like we vote in the same rich people with special interests. The electoral college decides for us anyway.

The Bailout proposal was originally 3 pages long but now it's 110 pages long. Will we see what really is in it ya think ?

I don't have any good answers yet, just observations.

Who are these Financial planners and what did they recomend people to buy and what was affordable to them.

I remember when I was applying for a loan I was told I could take out a huge amount of $ . Seemed a bit dumb to take out all that money because you have to pay it back I was told.

What kind of people buy a home with an adjustable mortgage rate anyway ?

Peace !

[Gris]

If we can pay a ka-jillion dollars to fund a war half-way across the world, then we ought to be able to pay a quarter-ka-jillion to fend off another great depression. I dunno...

StratCat, read up amigo, one of the current candidates says he will help those American automakers retool for hybrid manufacture - on the condition they do it all in the USA. Might be a good idea...

Every political affiliation test I ever took pops me out as a Libertarian, LOL...

NTBlues, I tend to run away as fast as I can from any person (candidate or otherwise) who wears religion on their short sleeve. The two best screwins I ever got were from so-called religious people. Funny how that works...

[MMP]

Show me a person who lived through the depression and thinks we should go ahead and have another one, and I'll show you a person who had it a lot better than average. There are already too many homeless, unemployed, and starving people as it is. Would it really be good for this country to have more?

Yes, the dugout in west Texas that my grandparents lived in was quite luxurious.....not.
A tomato or a canned food is bad and the Government has it removed from the shelves.
A car has a defective part so the Government has the manufacturer recall it.
A mortgage lender qualifies a buyer for more house than the buyer can really afford, because they can always sell the house for more than the original loan if the buyer defaults on the the payments. Huh?
This is the equivalent of buying stock on margin.....thinking one can sell it for a profit if one can't make the payment. Margin buying is what caused the depression and is now illegal. Where were the Govt. watchdogs when the mortgage and banking industries were doing this same thing with houses?

Where were the Govt. watchdogs?
For the S&L crisis of the 70s.
For the DotCom collapse of the late 90s.
While we export jobs that are desperately needed here.

No, no one wants another depression, but we may still have to go through one to fix what's wrong with our economy.

[muddy]

Well, I'll just say that financially things are about as bad as they have ever been for our family.

Just can't seem to make ends meet anymore. I feel like we're working for the company store?!

[stratcat55]

Gris,
Anyway you look at it, the American people should not bail out the automakers.
The government does not help me buy new camera gear for my small photography studio. "Writing off" my new equipment only reduces my taxes by a very small amount. I don't get free equipment. As far as the retooling goes, I have read up, we'll see. It's a huge argument right now and I bet there will be some loophole that will let them do a small portion of manufacturing here and the rest overseas. It depends who gets elected. You know how that goes. Candidates will feed you nothing but promises, but getting them through is another matter.
We are a nation of Mushrooms. The politicians feed us shit and keep us in the dark. No matter what, everyone 18 years old and over needs to vote. We always seem to let the minority speak for the majority and then complain about it.
In some countries, people risk death for voting, we just take it for granted and figure someone else will take care of it.

[clayville]

It's interesting to me how individuals react to this crisis. Many fall back on standard "class warfare" mindsets: it's either the "welfare queens" or the white collar sharks (the money-hungry ones on WallSt and the power-hungry ones in DC) that caused it. In any event, always "the other guy", that sort of thing. I don't mean here, above... but everywhere.

The way I see it, this is more a crisis of confidence in financial institutions, not so much a huge wave of individuals living beyond their means. As policy, encouraging home ownership in formerly "red-lined" urban neighborhoods is a good thing -- and not the cause of this mess. Trading a suburban bungalow in for a McMansion, if the payments aren't made, is far worse.

But if there was anything like a one-to-one relationship between the lenders and the borrower and the borrower's assets it would be a far simpler matter to assess the risk, the probability of any loan/mortgage being paid back and the value of the underlying asset, no matter where it is.

When the financial wizards commoditized those loans, bundled them into a batch of meatballs and sold them off, it became impossible to vouch for the riskiness of any individual meatball. When the meatballs were used as collateral to borrow money to buy more meatballs it got worse.

But unlike with meatballs, the bad egg isn't "everywhere" tainting all meatballs (I don't think), it's in a sense "nowhere" that can be found. With no one able to find or assess the risk, to find the "bad loans", the banks at last stopped issuing credit, and it's those big guys in the middle who've been playing a shell game for years with their hands out now. Regulation, and enforcement of existing regulations could have prevented that, imho.

[jeez... I need to drink some more coffee and contribute something more useful here! Not so easy to do without politics. ]

[Kap'n]

The rescue plan the House will vote on tomorrow will only be open to companies who deny their executives "golden parachute" deals. They'd also be taxed heavily on any compensation to their executives over $500,000. So, assuming the bill passes, there won't be any multi-million-dollar salaries or severance packages for the CEOs of any firms it bails out.

Too bad most of the folks who engineered this mess, already bailed out, and left somebody else holding the bag. And I believe it's too late to take back their parachutes.

And far be it from me to recommend that people in this line of business be able to make millions, but on the other hand, should we be denying the folks who actually steer us out of this mess the ability to make some money?

This entire mess is the end result of huge companies being allowed to run unchecked in a free market economy. The last time we saw this mess, on a larger scale, George Sr. was at the helm, and Neil Bush was conveniently sheltered from the repercussions.

Can you say Resolution Trust Corporation? I knew you could.

You and I will always be the ones to foot the bill when this stuff happens, and it will. Again and again. Make no mistake.

[stratcat55]

Things I've noticed with my business are people have a lot less disposable income, so my family portrait portion of my business took a huge tumble. My commercial portion fell too. It's rough, but like I said, I have no debt to speak of. As long as we pay our property taxes, we'll have a roof.
I remember way back, credit was a harder thing to get. Mortgages, credit cards etc. I have some friends and family members who just recently lost their homes. They thought they could get out without a problem but the housing market fell. The house they bought lost over 200 grand in property value, and now the bank owns it. They got the house through an interest only loan. If I could only afford the interest on a loan, I would think I couldn't afford the house right? Nah....
People need to blame themselves too not just the banks. We live a simple life with simple needs. I don't care about flashy cars, clothes etc. I don't care what the Jones's are doing and whether I can keep up with them.

[NeoFauve]

The solution is easy. Take the 700 billion dollars, divide it by the population and give every man, woman, and child their equal share. Watch the econony move then!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Bbbbut, but, but wouldn't that be a "redistribution of wealth," or "socialism?"

It's our duty to elect the kind people who will stay out of the way of, or maybe unleash "market forces," so they can improve everybody's life, because we know they will.

And the nice thing about America, in it's current state, is that when a theory is proven grotesquely wrong we're all volunteered to correct it, largely without being asked to consider that anything wrong was knowingly done.

[tooncat]

Don't know why but I'm feeling positive this morning. I'm a trader and an investor and have been more ot less riding this market out since it started falling in October 2007. I see financial deals (ie very strong companies with very cheap stocks) out there that just have not been there for years.

When they pass this bailout, and they will, I think we are going to see a bottom in the housing bust and the banking system getting back to what it is supposed to be doing...making loans.


All just in my humble opinion.

[cdw2000]

The solution is easy. Take the 700 billion dollars, divide it by the population and give every man, woman, and child their equal share. Watch the econony move then!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I just got an email proposing this same thing, it claimed we would all get $3.5 million ---- but the math was wrong.

To put this in perspective, according to the U.S. Census, there are about 230 million people aged 18 or over in the U.S. (I just looked this up today).

$700B / 230M = $3,043. Just twice the average "economic incentive" tax rebate most of us already got earlier this year.

Redistributing this wouldn't do diddly, except allowing some of us on this forum to buy more Custom Shop Fenders.

On another note, I consider myself a fiscal conservative. The only debts I have are a fixed mortgage (through a credit union that did not ever offer sub-prime loans) and a car loan. I use credit cards only as a convenient way to pay for things. The balance gets paid off every month. The credit card company has not made a dime of interest off me.

Earlier this year I read that the AVERAGE credit card debt is $9,000! That means for everyone like me, there is someone with more than $9,000 in credit card debt. This just flabbergasts me.

So I can imagine there are a large percentage of people who were willing to stretch reality and buy as much house as the mortgage lenders would give them. I think the blame can be distributed pretty much across the board, judging by the number of outrageously large houses that were built in my town the last few years.

I don't know if it's in the bailout bill or not, but I think there should be a requirement that all mortgage lenders have to hold mortgages for at least five years before being allowed to sell them. That would make them a bit more conservative in their approval practices.

OK, enough politics for me, back to reading about guitars and amps.

[flintpunk]

Here's an interesting take on the whole thing...believe what you will of it.

http://www.youtube.com/watch?v=H5tZc8oH--o

[Gris]

I just read that under the 'bailout bill' the gvt will only buy mtgs originated after March 14 of this year (2008). Starting to wonder if that will do much to solve the problem or just be a glancing blow to the tip of the iceberg...???

[redcoats1976]

ahhhh...well i bank with citibank as of this morning. if i still have any money left...

[Kap'n]

The worst is not here yet.

Just wait until all the folks who are barely scraping by with their aformentioned $9K of unsecured debt start defaulting because of rising food and fuel prices and job losses.

[stratcat55]

Yep. Time to start stuffing the mattress.