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Bush has just tripled the US foreign debt overnight
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Buffett see opportunity in the Paulson Plan...Sept. 24 (Bloomberg) -- Billionaire Warren Buffett, calling turmoil in the markets an ``economic Pearl Harbor,'' said his $5 billion investment in Goldman Sachs Group Inc. is an endorsement of the Treasury's $700 billion bank rescue plan.
"I am betting on the Congress doing the right thing for the American public and passing this bill,'' Buffett said on cable channel CNBC today. ``I certainly have a vote of confidence in Goldman and vote of confidence in Congress.''
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke are pushing Congress to quickly approve the proposal to remove illiquid assets from the banking system. Buffett is buying a stake in New York-based Goldman after three of the investment bank's biggest competitors collapsed or were forced into emergency sales.
"I think the Treasury will pay back the $700 billion and make a considerable amount of money,'' Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. "Unfortunately, I'm tapped out.''
Goldman rose $4.95, or 4 percent, to $130 at 4 p.m. in New York Stock Exchange composite trading after Buffett's Berkshire Hathaway Inc. agreed yesterday to the investment. It will pay 10 percent interest and give Buffett the right to buy $5 billion in common stock in the next five years at $115 a share.
Scold
Buffett, 78, has frequently scolded Wall Street for shoddy accounting and risky investments. He's investing in the most profitable U.S. investment bank a week after Lehman Brothers Holdings Inc. went bankrupt and Merrill Lynch & Co. sold itself to Bank of America Corp. Bears Stearns Cos. in March was absorbed by JPMorgan Chase & Co.
"It's not like Pearl Harbor where you could look at what happened with your own eyes and decide you had to do something that day,'' Buffett said on the cable channel. "This is sort of an economic Pearl Harbor we're going through.''
Michael Yoshikami, president and chief investment strategist for YCMNet Advisors in Walnut Creek, California, which manages $1 billion, including Berkshire shares, said Buffett's investment will pay off.
"It's a deal that will be quite lucrative for Berkshire Hathaway shareholders,'' Yoshikami said. For financial firms, "this suggests the world is not coming to an end.''
Goldman's stock skidded about 40 percent this year. Berkshire rose $4,500, or 3.5 percent, to $133,300 at 4 p.m. in New York Stock Exchange composite trading, trimming its decline to 5.9 percent this year.
Buffett's Focus
Buffett chooses where to put Berkshire's money by focusing on companies with what he considers strong managers and a market- leading franchise. He invested more Berkshire cash in the past nine months, after complaining last year that he couldn't find anything big enough to buy. He has agreed to spend at least $25 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire.
"It's nice to have a lot of money, but you know, you don't want to keep it around forever,'' Buffett said. "I prefer buying things. Otherwise, it's a little like saving sex for your old age.''
"When the price gets right, you have to get in,'' said Gerald Martin, a finance professor at American University in Washington who has studied Buffett's investment history. "The pendulum may finally have swung too far the other way.''
Berkshire has announced nine acquisitions since October, compared with six in the prior 12 months, when his largest deal was $350 million to buy VF Corp., an underwear and pajama maker.
2008 Deals
This year, the deals include the $4.5 billion purchase of Marmon Holdings Inc., the Pritzker family's collection of 125 companies, in March, and a $4.7 billion bid this month for Constellation Energy Group Inc., the largest U.S. power seller.
Buffett provided $6.5 billion in April to help Mars Inc. buy Wm. Wrigley Jr. Co., giving him a stake in the chewing gum maker. He pledged $3 billion in July to Dow Chemical Co.'s $15.4 billion takeover of Rohm & Haas Co. By midyear, his cash holdings had declined to $31.2 billion from $44.3 billion at the end of 2007.
Berkshire has bought $6.5 billion in auction-rate securities since December after the market froze. Yields for the debt rose as investors found themselves unable to redeem the securities. Dealers that ran the periodic bidding to determine interest costs stopped supporting the auctions.
The Goldman investment puts Berkshire back in an industry Buffett has mostly shunned since 1997, when Salomon Brothers was sold to Travelers Group. Buffett helped the firm fend off an unwanted takeover in 1987, only to see the New York securities firm trail every U.S. stock index for the next decade.
`Better' Deal
"Buffett has struck an extremely attractive deal,'' Guy Moszkowski, an analyst at Merrill Lynch & Co., wrote in a note to investors today. ``He is, we believe, getting a better deal than he did in 1987 when he bought a Salomon Bros. convertible with a 9 percent yield, for a company that is considerably more attractive than the '87 Salomon.''
Buffett has credited Byron Trott, a Goldman banker, with helping Berkshire complete at least four acquisitions, including the Marmon deal. Trott "understands Berkshire far better than any investment banker with whom we have talked and - it hurts me to say this - earns his fee,'' Buffett wrote to shareholders in Berkshire's 2003 annual report.
Buffett has sometimes criticized Wall Street, saying at a news conference in May that the industry is "going to go where the money is and not worry about consequences.''
Financial Stakes
The Salomon experience hasn't damped his enthusiasm for financial companies. Wells Fargo & Co., American Express and U.S. Bancorp are among Berkshire's 10 biggest holdings. His company is the No. 1 stakeholder in all three.
Buffett's investment decisions are often imitated by mutual funds and individual investors in an attempt to duplicate his success. A 2007 study by Martin, the American University professor, found that using this strategy for 31 years would have delivered annualized returns of about 25 percent, double the return of the S&P 500.
Berkshire spokeswoman Jackie Wilson didn't return messages seeking comment.0 -
Re: section 8
Anyone remember kingpin.
Finally! Big Hank Poulson (and Ben Bernanky) is above the law.:)
Not sure if everyone else knew, I didnt, That the reason the fed had to get approval for 700billion bailout is because they have already gone through the 888 billion they were allowed to legally distribute (a 1930's law). It was only when I saw a headline on bloomberg yesterday "total bail out may come to 1.8trillion" that my curiosity was raised.
I too don't know where this information originates. It doesn't seem likely that a 1930's era law placed a restriction as described. The $888 billion might come from media reports about the assets held by the Reserve on its balance sheet; the last time I looked, it's close to that figure.
However, the main problem here is that the Fed isn't seeking approval for the bailout and isn't looking for $700 billion; the Department of the Treasury made the request.0 -
It's nuckin futs.
700 Billion, surely they should buy shares of the banks assets with that and make the American people a profit.....The bottom line is it's an opportunity for the ultra rich to become ultra richer.
Never mind the billions and trillions.
If I have seven euro of debt and you bail me out by paying my debts I'm indebted to you. You could do this 'to be nice' but it would make more sence if you got something in return.0 -
Have you got a source for that $888b limit?
http://www.cnbc.com/id/26808715
This is from CNBC, its a 1.8 trillion Dollar bail out, the 700 billion as you can see in the article is only part of the bail out( the part they have to ask for cos they have already given away the rest).
Its the part they have to ask for they have already given out the rest. I deffo read that 888 billion figure yesterday ill try find it now.
However from the article above you can clearly see that the bailout is 1.8 trillion, not a 700 billion bail out that all the media are reporting.
Found it.
http://www.iht.com/articles/2008/07/30/business/30housing.php
Its all to do with the National Debt Ceiling. This National Debt ceiling law came in in the 1930's after the wall street crash.
On July 30th last they rose the National debt ceiling by over 800 billion.
I.e had an 800 billion dollar bailout. They used this for fanny and freddy, JP morgan chase, AIG etc. see cnbc article above.
This larger amount was passed by congress without political questioning just 1 and 1/2 months ago. So whats the difference this time! Its the Public awareness and disquiet that the politicians are feeling from their constituants.
When the media talk about the 700billion dollar bail out without mentioning that only a couple of months back they already got 800 billion, which they have obviously run out of.0 -
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http://www.cnbc.com/id/26808715
This is from CNBC, its a 1.8 trillion Dollar bail out, the 700 billion as you can see in the article is only part of the bail out( the part they have to ask for cos they have already given away the rest).
Its the part they have to ask for they have already given out the rest. I deffo read that 888 billion figure yesterday ill try find it now.
However from the article above you can clearly see that the bailout is 1.8 trillion, not a 700 billion bail out that all the media are reporting.
Just a couple of points here: the media are reporting that the current request from the Secretary of the Treasury is $700 million. The other figures that are mentioned in the cited CNBC report--and many, many other reports--are separate issues. The commitment to banks, AIG, Fannie & Freddie have also been extensively reported; I haven't read anywhere that those commitments are part of the $700 billion: they're separate and distinct. I haven't seen mainstream media outlet misrepresent the potential total commitment in the current financial crisis. In fact, the $1.8 trillion isn't even a firm figure; it could be more, it could also be less.0 -
It's nuckin futs.
700 Billion, surely they should buy shares of the banks assets with that and make the American people a profit.....The bottom line is it's an opportunity for the ultra rich to become ultra richer.
Never mind the billions and trillions.
If I have seven euro of debt and you bail me out by paying my debts I'm indebted to you. You could do this 'to be nice' but it would make more sence if you got something in return.
When the plan is implemented we'll know exactly what the Treasury wants to do, but the media and the Secretary indicate what you're saying. The plan appears to be the acquisition of non-performing assets from distressed banks. The purchase would be made from a bank and not a person. The Treasury would then own those loans and, potentially, the property if a default occurred. Right now, the plan is being debated; no one truly knows what will happen until Congress passes a bill that is signed into law by the president.0 -
SoCal90046 wrote: »I too don't know where this information originates. It doesn't seem likely that a 1930's era law placed a restriction as described. The $888 billion might come from media reports about the assets held by the Reserve on its balance sheet; the last time I looked, it's close to that figure.
However, the main problem here is that the Fed isn't seeking approval for the bailout and isn't looking for $700 billion; the Department of the Treasury made the request.
You dont think americans would have a law to put a limit on how much currency the fed could create?
Although you are technicly correct I think that is just symantics.
If it isnt the Fed looking for the money then what is Ben bernanke (head of the fed) doing sitting beside Hank poulson (head of the treasury) at the "please give us 700 billion dollars" hearings.
The Fed tell the treasury how much paper they need to create in order to exchange with international banks for bonds. Then the treasury pass on the request to congress to approve.0 -
You dont think americans would have a law to put a limit on how much currency the fed could create?
Although you are technicly correct I think that is just symantics.
If it isnt the Fed looking for the money then what is Ben bernanke (head of the fed) doing sitting beside Hank poulson (head of the treasury) at the "please give us 700 billion dollars" hearings.
The Fed tell the treasury how much paper they need to create in order to exchange with international banks for bonds. Then the treasury pass on the request to congress to approve.
That's not what I wrote. You wrote that there was a 1930s era law; I don't know of that law.
There was no issue of semantics in what I wrote: the Fed handles monetary policy; the executive and legislative branches handle fiscal policy. It's not an issue of semantics.
You're question about Ben Bernanke participating in the current hearings isn't serious, is it? When you read the original proposal issued by the Department of the Treasury that will clear up what these hearings are all about.0 -
SoCal90046 wrote: »Just a couple of points here: the media are reporting that the current request from the Secretary of the Treasury is $700 million. The other figures that are mentioned in the cited CNBC report--and many, many other reports--are separate issues. The commitment to banks, AIG, Fannie & Freddie have also been extensively reported; I haven't read anywhere that those commitments are part of the $700 billion: they're separate and distinct. I haven't seen mainstream media outlet misrepresent the potential total commitment in the current financial crisis. In fact, the $1.8 trillion isn't even a firm figure; it could be more, it could also be less.
Every headline I see is calling this a 700billion bail out!
Its not calling it the current 700billion bail out which is on top of a 800billion bail out of july 30th, which you probobly never even heard about unless you read the business broadsheets.
If the general public were aware of the 800 billion bail out of 30 july then the media would be forced to ask a fairly obvious question.
So how long till you guys come back for another 700 billion from the american tax payer.
It would also lead people to ask why their congressmen didnt hold hearings for the first 800 billion.0 -
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SoCal90046 wrote: »The plan appears to be the acquisition of non-performing assets from distressed banks. The purchase would be made from a bank and not a person.
I wonder if there will be anything in the Plan that will limit the banks from passing illiquid MBS from other organisations - hedge funds for example.0 -
For info :
http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html"The secretary and the administration need to know that what they have sent to us is not acceptable," says Committee Chairman Chris Dodd, D-Conn. The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."
Bolding mine.0 -
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Sorry if this has been mentioned already in this thread, or discussed at length before, but I was just wondering something. Instead of incresing national debt bailing out banks (at the expense of the taxpayer), why doesn't the us Government just pay off all the bad loans people have defaulted on? That way the banks are happy because they've been paid, and taxpayers are happy because they'll actually see their tax dollars, and the economy is happy (probably wrong on that last one). Or am I completely missing something important here?0 -
Dunno what would happen really.
People would own more of their home, they'd be happy.
The banks would be able to balance their books a little bit - obviously in the circumstances they would have to hand over the property deeds whilst receiving only a negotiable percentage of the outstanding debt - and well can a corporation be 'happy'?!
Psychologically, they're probably sociopathic, but it's really about the people that own the banks.
They probably cashed out long ago (sold many of their shares to your pension funds) and in a way caused this crisis by accepting dubious valuations and accounts - and if the govt pay off the debt and only get stocks in these companies they probably won't be worth much anyways.... so how would the 'financial elite' of the world feel about the plan to use govt money to reduce mortgage bills?
Anyone know any of them?0 -
I haven't seen mainstream media outlet misrepresent the potential total commitment in the current financial crisis. In fact, the $1.8 trillion isn't even a firm figure; it could be more, it could also be less.Every headline I see is calling this a 700billion bail out!
Ah headlines. Not worth the paper they're printed on. Like dollars these days.
Anyways - on top of the unlimited bailout with 'big numbers', there is also the Fannie and Freddie fiasco - total value of 'assets' 5 trillionThe U.S. government has taken control of struggling Fannie Mae and Freddie Mac, companies that combined control $5 trillion in assets. Michael Greenberger, JD, a professor at the School of Law and a former director at the Commodity Futures Trading Commission, said, "Every time this happens, it’s a little known publicized fact that it’s the U.S. taxpayer that’s now really standing behind these institutions."
I don't know if F&F were involved in Credit Default Swaps or just traditional mortages, but the NYT yesterday was discussing a 30 cent in the dollar value on CDSs. Actually it was pushing for a value in that range whilst there is downward pressure.
What kind of stocks are going up at the moment?!0 -
people need to get a little bit of perspective. After world was 2. Europe was in so much poverty that the us bailout is minor in comparison.0
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Every headline I see is calling this a 700billion bail out!
Its not calling it the current 700billion bail out which is on top of a 800billion bail out of july 30th, which you probobly never even heard about unless you read the business broadsheets.
If the general public were aware of the 800 billion bail out of 30 july then the media would be forced to ask a fairly obvious question.
So how long till you guys come back for another 700 billion from the american tax payer.
It would also lead people to ask why their congressmen didnt hold hearings for the first 800 billion.
That's what the current appeal appears to be: a $700 billion dollar bail out. I haven't read any media outlet ignoring what's happened. You're inferring something some from headlines that, IMHO, isn't reasonable.
Anyone can read the other actions by both the Treasury and the Fed; these actions are separate and distinct from what Paulson is requesting from the Congress.
I don't represent the general public and can't comment on what people may or may not know. My assertion is that the general conclusion you're drawing from media reports isn't accurate.
As an FYI, there was never a request from Congress for $800 billion. Your comment misrepresents what occurred during the past few weeks.0 -
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Sorry if this has been mentioned already in this thread, or discussed at length before, but I was just wondering something. Instead of incresing national debt bailing out banks (at the expense of the taxpayer), why doesn't the us Government just pay off all the bad loans people have defaulted on? That way the banks are happy because they've been paid, and taxpayers are happy because they'll actually see their tax dollars, and the economy is happy (probably wrong on that last one). Or am I completely missing something important here?
There's actually a moral hazard there in the sense that you're rewarding behavior you don't want to encourage.
I think that there is a way to buy bad loans--at a mildly punitive rate--and sell them. I would also like to see a certain amount of suffering in the earnings of the banks that participate in any program.0 -
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SoCal90046 wrote: »There's actually a moral hazard there in the sense that you're rewarding behavior you don't want to encourage.
I think that there is a way to buy bad loans--at a mildly punitive rate--and sell them. I would also like to see a certain amount of suffering in the earnings of the banks that participate in any program.
True there is a moral hazard, but it seems like the best of two evils, ie. Either you're rewarding the banks or the people.0 -
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True there is a moral hazard, but it seems like the best of two evils, ie. Either you're rewarding the banks or the people.
I can think of a way that could avoid helping banks and those that borrowed heavily without a hope of repayment. Here are some thoughts: it's not a perfect idea, but it addresses some issues.
So, the government is likely to commit $700 billion or some other gargantuan amount of money to help solve the current crisis. I want to make a modest proposal; the underlying them is that we should punish those who did wrong and reward those who do right. Here goes:
The banks
The Department of the Treasury will purchase non-performing loans from banks at a punitive--that is, less than market rate. Banks that participate in the program will also suffer and additional modest, but not insignificant, tax on profits for ten years. The notes purchased for the banks will be collateralized and made available for sale--more in a moment.
The homeowners
Homeowners who are at the other end of these bad loans will have their mortgages refinanced at the prevailing 30-year fixed rate plus 100 basis points. So, if the 30-year fixed rate is 5.9%, then the newly minted 30-year mortgage will be at 6.9%. Here's the important point: the newly minted mortgage will be based on the outstanding balance and not on the current market value of the property. Next, each year, the outstanding balance will be adjusted up by the core rate of inflation. The goal is to encourage the homeowner to work hard and pay off the loan by getting a traditional mortgage. If someone can't afford a 30-year fixed plus 100 basis points, they shouldn't be in the house anyway.
Next, we come to the people that foot the bill.
The people footing the bill
So, the government essentially collateralizes the debt in some fashion, bundles it and uses the stream of interest payments to those who purchase the debt. Rather than fund it exclusively from foreign borrowing, why not do something analogous to those war bonds of WWII. There's a catch. I want to reward those who are prepared to should the burden for others. These new "bonds" could carry a modest interest rate.
Create a new Individual Retirment Account (and IRA in the US) that has all or almost all the characteristics of a Roth (tax free) IRA;
There should be no limit to contributions and rollovers from traditional IRAs are allowed;
There is one and only one stipulation, however: when it's set up, the owner of the IRA has to have at least 15% of the assets invested in these new government issued instruments. These instruments cannot be sold for 10 years; if they are it negates the tax benefits of this new IRA;
The other 85% can be invested just like a regular IRA and, after 10 years, all distributions are free of taxes, just like a Roth IRA.
I am trying to think of something that makes the whole bailout (not a great term) more palatable. I do think that those who "sinned" for want of a better term, should not be rewarded and should actually have to face (albeit in a diluted form) the consequences of their actions.
Those in the US that are prepared to step up and help in bailing out others should be rewarded. It's not a perfect idea, but it does minimize the moral hazard inherent in what's likely about to happen.0 -
SoCal90046 wrote: »That's what the current appeal appears to be: a $700 billion dollar bail out. I haven't read any media outlet ignoring what's happened. You're inferring something some from headlines that, IMHO, isn't reasonable.
Anyone can read the other actions by both the Treasury and the Fed; these actions are separate and distinct from what Paulson is requesting from the Congress.
I don't represent the general public and can't comment on what people may or may not know. My assertion is that the general conclusion you're drawing from media reports isn't accurate.
As an FYI, there was never a request from Congress for $800 billion. Your comment misrepresents what occurred during the past few weeks.
I didnt say there was a request from congress for 800 billion. there was a request from the treasury, that was passed by congress on 30th of july last for 800 billion. That was the money they used to bail out fanny, freddy AIG 85 billion JP Morgan (barely reported) 116 billion etc.
http://www.iht.com/articles/2008/07/30/business/30housing.php
What I am saying is that all the media I see at the moment are calling it a 700billion dollar bailout. I am saying that, the media are not reporting the size of the bailout properly.
They should be calling it a 1.8 trillion dollar bailout. Which is the actual cost to the American tax payer.
They are telling the truth but are not telling the whole truth.
I think they are doing this to cover their own asses because the did not make the 800 billion dollar bailout from July front page news.
It also means the media dont have to ask congress why did you pass the 800 billion 2 months ago so easily?0 -
SoCal you are making my point for me.
"So, the government is likely to commit $700 billion or some other gargantuan amount of money to help solve the current crisis."
Stop calling it a 700 billion dollar + bailout, its a 1.8 trillion dollar bailout.
Since the actual figure is 2 1/2 times figure than the one being used by all of the media we need to use the actual figure.
When we do so it raises lots of interesting questions.0 -
The only outcome without moral hazzard would have meant financial hazzard.
IE dont give the banks a penny and let the chips fall where they may.
Too late for that now. They have already given them about a trillion. and will mostlikely give another 700 billion more.
Poulson is like a heroin addict begging for another hit!0 -
I didnt say there was a request from congress for 800 billion. there was a request from the treasury, that was passed by congress on 30th of july last for 800 billion. That was the money they used to bail out fanny, freddy AIG 85 billion JP Morgan (barely reported) 116 billion etc.
http://www.iht.com/articles/2008/07/30/business/30housing.php
What I am saying is that all the media I see at the moment are calling it a 700billion dollar bailout. I am saying that, the media are not reporting the size of the bailout properly.
They should be calling it a 1.8 trillion dollar bailout. Which is the actual cost to the American tax payer.
They are telling the truth but are not telling the whole truth.
I think they are doing this to cover their own asses because the did not make the 800 billion dollar bailout from July front page news.
It also means the media dont have to ask congress why did you pass the 800 billion 2 months ago so easily?
Eamonn79,
You didn't read what I wrote; you're responding to something I didn't state.
You're also misstating what occurred in July. The Housing and Economic Recovery Act was signed into law on July 30. The act raises the debt ceiling by $800 billion. It's not payment to any GSE or other entity; it's simply an increase of the debt ceiling. There's a difference. It could result in $800 billion of new notes or bills; it hasn't yet.
The statement that it was barely report is completely inaccurate. It was widely reported. This story was big news.
So, with regard to the bailout: the media reports are about the efforts of the Secretary of the Treasury to raise $700 billion to buy bad loans. The media are reporting about the current efforts of the Secretary of the Treasury; they're not reporting on the cumulative potential cost of the current fiscal crisis.
Come one, please: the idea that The Housing and Economic Recovery Act wasn't front is just silly. :eek:0 -
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I wonder has anyone spotted the mistake the FED made by lowering rates when the american economy statred to show signs of flagging.
The credit squeeze had begun and the risk the bankers were taking when issueing loans looked higher and higher....but then the FED (with or without knowing) statred cutting rates.
That just fed the lenders with the notion that the State would be there to bail them out.
Even though id like to see some of the greedy banks and investment houses being thought a lesson...the fact remains that this bail out is needed...although the way its being done Im not so sure about. even though im just a layman...what would make more sense to me would be the re-capitalisation of troubled banks....while letting them deal with these "Toxic" loans themselves.
One interesting aspect of this bailout plan is the prereqesuite of other Central banks being mobilised into buying up US Goverment bonds on these aquired mortgage backed toxic assets...most notably the Chinese central bank.
I think it also be a moment in time when the real economic powerhouses will shine.0 -
SoCal90046 wrote: »Eamonn79,
You're also misstating what occurred in July. The Housing and Economic Recovery Act was signed into law on July 30. The act raises the debt ceiling by $800 billion. It's not payment to any GSE or other entity; it's simply an increase of the debt ceiling. There's a difference. It could result in $800 billion of new notes or bills; it hasn't yet.
I think it is you who are mistaken my friend.
That 800 billion has already been spent.
If it hadnt then why would he need to go to congress pleading to raise the national dept ceiling again?
Raising the debt ceiling by X amount is hank poulson speak for the amount he needs to spend.
Where do you think He got the money to bail out fanny and freddie and all the rest of them?
If you look at the famous three page 700 billion bail out document you will see in section 10
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000
I.e 700 billion more than it was.0 -
I think it is you who are mistaken my friend.
That 800 billion has already been spent.
If it hadnt then why would he need to go to congress pleading to raise the national dept ceiling again?
Raising the debt ceiling by X amount is hank poulson speak for the amount he needs to spend.
Where do you think He got the money to bail out fanny and freddie and all the rest of them?
If you look at the famous three page 700 billion bail out document you will see in section 10
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000
I.e 700 billion more than it was.
Here's a book that will help you develop better arguments.
The debt ceiling has nothing to do with the flow of spending. When Congress passed a bill to authorize spending of $800 billion, the debt ceiling had to be raised too. If the funds were already committed, there would be some accompanying event, such as the issuance of Treasury bonds; that hasn't occurred. Regardless if the funds were spent, if the administration wants to commit more funds, and Paulson has asked for an additional $700 billion, the ceiling on the debt has to be raised again.0 -
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I wonder has anyone spotted the mistake the FED made by lowering rates when the american economy statred to show signs of flagging.
The credit squeeze had begun and the risk the bankers were taking when issueing loans looked higher and higher....but then the FED (with or without knowing) statred cutting rates.
That just fed the lenders with the notion that the State would be there to bail them out.
Even though id like to see some of the greedy banks and investment houses being thought a lesson...the fact remains that this bail out is needed...although the way its being done Im not so sure about. even though im just a layman...what would make more sense to me would be the re-capitalisation of troubled banks....while letting them deal with these "Toxic" loans themselves.
One interesting aspect of this bailout plan is the prereqesuite of other Central banks being mobilised into buying up US Goverment bonds on these aquired mortgage backed toxic assets...most notably the Chinese central bank.
I think it also be a moment in time when the real economic powerhouses will shine.
I suspect you're talking about the Fed Funds Rate, right? There's definitely been an easing of that rate since early 06. The target rate was cut almost a year ago and the rate has been eased steadily through April. I don't see a strong connection between the change in rate in '07 and the mortgage problems; rates were eased as liquidity concerns started to mount.
Mortgage rates are affected by the actions of the FOMC, but it's not a linear relationship. The rate is adjusted for a host of reasons, but it's likely the case that as long as there is no sign of long-term inflation, the Fed changes rates to reach a target money supply. The housing bubble was already passed its peak in 07 when rates were eased.0
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