Draft of our bailout plan

[Adam Brooks]

Mish has some excellent commentary about it

http://globaleconomicanalysis.blogspot.com/2008/09/700-billion-bailout-proposal.html

cliff notes: the financial burden of incompetent leadership and greed is being put on us the tax payer. The decisions made by the treasury are not reviewable by any court of law or any other government agency. They will now be acting outside/above the constitution of the United States of America

:stare

[Karps TA]

I've been arguing for years that Wall Street is not working correctly. When CEO's are paid mainly on the performance of the company stock, it of course will lead to poor decision making. It's human nature to be greedy. And when I see Company X make $50 mil in profits, but some "analyst" expected them to make $52mil causing the stock to take a big hit, while Company Y misses there targets by a large margin, but annouces layoffs at the same time, their stock goes up, that drives me crazy. What decisions do you think someone getting paid by the stock price is going to end up making.

But our stock market has changed from a manufacturing based market, to a financial based market. Which is why the war really hasn't done anything for the economy, where usually a war is a big boon to it. But we shipped most of our mfg out of the country so it doesn't help us anymore.

Are any of these CEO's of companies being bailed out being forced to give back their tens to hundreds of millions of dollars in bonuses that they got the last couple years for making these bad decision?

I hate that we have to create more govt because of this. For the Republican party being for less govt they sure like to create more branches of it when the current branches don't do their jobs. FBI and CIA drop the ball, lets creat Homeland Security. Now this.

[Adam Brooks]

great question, so far no CEO has been charged with anything.... even in the case of LEH who was doing accounting fraud.

as far as companies missing targets and the price fluctuating inversely, price movements are more complex. Not everyone makes decisions on when to buy or sell based on news or analyst recommendations (which are usually wrong).

the markets have actually been working as they should, the gov is now trying to manipulate the pants off them since people are realizing that everyone is over leveraged like crazy

[Prince Valiant]

Which is why the war really hasn't done anything for the economy, where usually a war is a big boon to it.Wars, including WWII, are drags on the economy...mountains of historical evidence supports this. Markets don't like uncertainty or volatility...both of which come with wars.

Peacetime has always been greater boons than any wartime era...

Don't tell the Soviet Union that wars would have been helpful to their economies...trying to keep up during the "cold war" resulted in them very nearly having NO economic growth...particularly compared to inflation. The action of them trying to poorly keep up with our military spending and fighting in Afghanistan effectively bankrupted them by the late 80's.

The war = economic growth myth is effective propaganda spread by cynical pacifist (IE, "could there be any reason for war? Of course! To make money!"). The myth stems from, quite frankly, adhering to the failed Keynesian theory...that gov't spending/intervention effectively directs economies.

Even WWII, no economic "boom" was realized until after the war. Once capital/investment wasn't tied up into production for products that the general public wasn't using, and became available out on the free market, THEN things got hopping. One can't argue that the general citizen was benefiting during WWII because 1) Everything was rationed...there was no excess for general consumption, everyone was stuck with a minimal amount that was far below the amount they desired (hence the need to ration) 2) Capital couldn't be used for innovation for general public use...heck, all the cars made during WWII from the manufactures were carry-overs during a time when cars were revamped significantly every year...it wasn't until after the war did we see a flurry of styling innovation. 3) Home ownership didn't experience a boom until when? Yep, after the war. One of my favorite myths was the myth of unemployment being effectively ended by WWII...in 1940, right before we began to mobilize for war, unemployment was ~10%...but then, But then, we took ~ 20% of those eligible men from the workforce, conscripting them into the armed forces...viola! No more unemployment!

There really is nothing about wartime economies that make them desirable. After WWII, once gov't direction was lifted off the back of the economy, then free market forces produced the boom afterward as capital was free to be directed by public desires for consumption/etc and innovation, etc.

As to the bailout, it's bizarre. WE are paying the price, one way or the other. Whether it's lost in the market NOW, or lost in income paid through taxes, it's still 700 billion. We just amortize the loss over a generation rather take the hit now...then factor in the interest :rolleyes:

An overly simple analogy imo would be that we're simply paying off one credit card with another.

[Al]

700 Billion Dollars averages out to about $2000 per US citizen.

The same amount of money could provide something more useful with a better return, such as universal health care.

[Adam Brooks]

exactly