$700 Billion Bailout

[Balta1701]

I really wish that the TARP funding would have required that this money be specifically tracked for its use, to see how it made them any different than they were pre-funding.

There's a number of things we all wish would have been done with the TARP program. Virtually all of which would have made it work better.

 

The thing that it all boils down to, IMO, is that the TARP program is right now doing exactly what it was designed to do; dump money in to banks with no accountability and no changes. It wasn't designed to unfreeze the credit markets, improve the economy, or stave off a depression. It was designed to do exactly what it is doing.

[StrangeSox]

The Volt.

 

Are you ready to fork over as much as $40k for a mid-sized non-luxury car?

[NorthSideSox72]

There's a number of things we all wish would have been done with the TARP program. Virtually all of which would have made it work better.

 

The thing that it all boils down to, IMO, is that the TARP program is right now doing exactly what it was designed to do; dump money in to banks with no accountability and no changes. It wasn't designed to unfreeze the credit markets, improve the economy, or stave off a depression. It was designed to do exactly what it is doing.

That's a little ridiculous. It may have been poorly executed (seems to be definite), and may not work at all. But it was quite clear that it was indeed an attempt to do all those things you mentioned.

 

[NorthSideSox72]

Are you ready to fork over as much as $40k for a mid-sized non-luxury car?

Its just like any new technology. Prices start high, the early adopters jump in, production increases, tax incentives might kick in for both sides, prices fall.

 

[southsider2k5]

Its just like any new technology. Prices start high, the early adopters jump in, production increases, tax incentives might kick in for both sides, prices fall.

 

Tax incentives do nothing to bring actual prices down. In fact they keep list prices artificially high. See things like health care and education.

[NorthSideSox72]

Tax incentives do nothing to bring actual prices down. In fact they keep list prices artificially high. See things like health care and education.

tax incentives to the consumer, as exist for hybrid and alt-energy vehicles, increase demand, which lowers prices.

 

Tax incentives for the cars themselves to the manufacturer increase production (potentially), also decreasing prices (though here the relationship is fuzzier).

 

I don't see how tax incentives as they relate to hard products (NOT services) would increase prices. They will decrease them.

 

[southsider2k5]

tax incentives to the consumer, as exist for hybrid and alt-energy vehicles, increase demand, which lowers prices.

 

Tax incentives for the cars themselves to the manufacturer increase production (potentially), also decreasing prices (though here the relationship is fuzzier).

 

I don't see how tax incentives as they relate to hard products (NOT services) would increase prices. They will decrease them.

 

They actually push the demand curve out and keep prices higher because more people can demand the products. Its no coincidence that the products that are the most heavily subsidized by the government are the some of the most ridiculously expensive when it comes to the face values.

[StrangeSox]

tax incentives to the consumer, as exist for hybrid and alt-energy vehicles, increase demand, which lowers prices.

 

I might only have a couple of college econ courses, but doesn't rising demand (without a simultaneous rise in supply) raise prices?

 

Costs will come down, but cars aren't exactly like DVD players or TV's. Hybrids still command a significant premium over non-hybrid versions.

[NorthSideSox72]

They actually push the demand curve out and keep prices higher because more people can demand the products. Its no coincidence that the products that are the most heavily subsidized by the government are the some of the most ridiculously expensive when it comes to the face values.

I understand that theory, I just have seen it not come to fruition in practice. Now, again, I am not talking about services, particularly health care which is just such a strange beast. I am talking about hard products to market. For those cases, your theory doesn't hold true.

 

I mean, you can even look narrowly at hybrid vehicles. Despite the increased demand, and the increasing sales, the car companies haven't raised prices on hybrid cars relatively (relative, meaning, relative to non-hybrids - the differential cost only). In fact, prices have been pretty stable. As the companies sell more, and the technologies are refined, they eventually break even then make money at them.

 

Look at what Tesla is doing - its classic hard product marketing. Their first car is aimed specifically at early adopters. They knew it would be very pricey to make all-electric cars at first, so they went high end and put out a sports car for $100k. In 2009, its a lucury sedan for $60k. In 2010, its a small sedan for $35k.

 

[NorthSideSox72]

I might only have a couple of college econ courses, but doesn't rising demand (without a simultaneous rise in supply) raise prices?

 

Costs will come down, but cars aren't exactly like DVD players or TV's. Hybrids still command a significant premium over non-hybrid versions.

Rising demand for a product increases prices becuase of its relationship with supply, in a perfect theoretical universe (which doesn't exist). However, when you are talking about new product entry, you have the very large offset of decreasing costs of production. That's why new technologies break that basic economic rule.

 

No, hybrids are not DVD's. But, there are a lot of similarities there. Costs of production will decrease, and increased production will yield further efficiencies. Also, as new competitors enter the market (which they are doing now), that competition also depresses prices. So there you have the rule breaker - new technologies entering the market do not tend to follow the basic economic principle you mentioned.

 

[lostfan]

Are we talking about economies of scale?

[NorthSideSox72]

Are we talking about economies of scale?

That certainly plays a factor, yes. New product goes to market doesn't get those economies at first (or, as many of them, in any case), but they would generally come to fruition as production levels increase. I wouldn't call that factor #1 though.

 

[southsider2k5]

Well they weren't quite able to take down SOX, but they are looking to take the teeth out of it...

 

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

FASB May Let Banks Delay Losses on Some Asset-Backed Securities

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By Jesse Westbrook

 

Dec. 23 (Bloomberg) -- The Financial Accounting Standards Board may let companies delay writedowns this year on some lower- rated asset-backed securities after banks and insurers blamed accounting rules for eroding their capital.

 

FASB, which sets U.S. accounting rules, is considering tweaking a provision requiring companies to absorb losses once expected cash flows from an asset suffer an “adverse change,” the board said in a statement yesterday. Instead, Norwalk, Connecticut-based FASB may let banks postpone writedowns until they decide they’re unlikely to collect all the money due them.

 

Companies said the rule compels “assumptions regarding future cash flows without consideration of the probability that all cash flows will be collected,” FASB said in its statement. “Numerous constituents expressed concern about this result, especially in cases where assets are still performing.”

 

FASB has been under pressure from banks, insurers and lawmakers to ease so-called mark-to-market accounting rules, which force companies to write down holdings to current trading prices. Executives of American International Group Inc., the New York-based insurer bailed out by the U.S. government, said the requirement contributed to the firm’s collapse, arguing that illiquid markets triggered losses it never expected to incur.

 

The proposal falls short of the moratorium on mark-to-market rules that 65 lawmakers sought in a Sept. 30 letter to Securities and Exchange Commission Chairman Christopher Cox. The Consumer Mortgage Coalition and other industry groups have also lobbied the SEC, which oversees FASB, to suspend the requirement.

 

The change would apply to securities that “are not of a high credit quality or that can be prepaid or otherwise settled in such a way that the holder would not recover substantially all of its recorded investment,” FASB said.

 

FASB will take public comment on the change until Dec. 30. Companies would be allowed to use the revised accounting treatment in year-end financial statements for 2008.

 

The Wall Street Journal reported FASB’s proposal earlier today.

 

To contact the reporter on this story: Jesse Westbrook in Washington at [email protected].

[mr_genius]

http://www.foxnews.com/story/0,2933,472304,00.html

 

Even as the industry struggles with massive losses, the UAW brass continue to own and operate a $33 million lakeside retreat in Michigan, complete with a $6.4 million designer golf course. And it's costing them millions each year.

 

 

of course

 

[Balta1701]

Gotta retain top talent.

 

They shouldn't be punished for the failures of upper management. Those bonuses are totally fine.

 

I dunno, I'm sure there's 1 or 2 more I get every time I point out someone else's golden parachute.

[kapkomet]

Gotta retain top talent.

 

They shouldn't be punished for the failures of upper management. Those bonuses are totally fine.

 

I dunno, I'm sure there's 1 or 2 more I get every time I point out someone else's golden parachute.

Fine. let's just have the China model where we all make the same, and are told by the government what jobs we all can have. I'm ready for it now... since I got fired, I've seen the ways of communism. I WANT COMMUNISM! Give me my house, job, doctor, what I can do and when! RIGHT NOW! I'm tired of the free market. It screwed me! DAMN IT, why do I not get a bailout?

 

 

[Rex Kickass]

http://www.foxnews.com/story/0,2933,472304,00.html

 

 

 

 

of course

 

The UAW has made bad decisions for a long time, and are indicative of the problems that the labor movement needs to walk away from. But if I understand it, labor leaders are elected by their rank and file, and you tend to get the governance that voters deserve.

[EvilMonkey]

Yup. They get union bosses like these!

 

http://www.clickondetroit.com/video/15908257/index.html

 

These guys should be fired, and sued by Ford.

[lostfan]

Fine. let's just have the China model where we all make the same, and are told by the government what jobs we all can have. I'm ready for it now... since I got fired, I've seen the ways of communism. I WANT COMMUNISM! Give me my house, job, doctor, what I can do and when! RIGHT NOW! I'm tired of the free market. It screwed me! DAMN IT, why do I not get a bailout?

Holy Kaperbole, you were about due for one of these posts.

[kapkomet]

Holy Kaperbole, you were about due for one of these posts.

 

 

[southsider2k5]

Fine. let's just have the China model where we all make the same, and are told by the government what jobs we all can have. I'm ready for it now... since I got fired, I've seen the ways of communism. I WANT COMMUNISM! Give me my house, job, doctor, what I can do and when! RIGHT NOW! I'm tired of the free market. It screwed me! DAMN IT, why do I not get a bailout?

 

In all reality, I wish that the media would do this type of detailed investigation of the day to day operations of any governmental agency, the way they have the banks and auto companies. Working in the south loop, I have gotten to know many people who work in various agencies in the federal government. I know everyone thinks that these private companies are run badly, but believe me when I say there is no way that the government would be doing any better, regulations, intervention, nationalization or whatever. They are run even worse, with less oversight, and with more waste. The funny thing is that it was government intervention that caused a large part of this crisis, but still no one outside of a few bloggers is talking about that fact.

[Cknolls]

Yup. They get union bosses like these!

 

http://www.clickondetroit.com/video/15908257/index.html

 

These guys should be fired, and sued by Ford.

 

 

You mean you don't work 4500 hours a year. You SLOUCH!!!!!

[kapkomet]

In all reality, I wish that the media would do this type of detailed investigation of the day to day operations of any governmental agency, the way they have the banks and auto companies. Working in the south loop, I have gotten to know many people who work in various agencies in the federal government. I know everyone thinks that these private companies are run badly, but believe me when I say there is no way that the government would be doing any better, regulations, intervention, nationalization or whatever. They are run even worse, with less oversight, and with more waste. The funny thing is that it was government intervention that caused a large part of this crisis, but still no one outside of a few bloggers is talking about that fact.

I know. There is more money then these "golden parachutes" floating around some other places, too. But, no one hears about it because it's "private". Please. The private sector can't hold a candle to the corruption in government, but we don't ever hear about that s*** because everyone thinks that "business" is evil.

 

This isn't Kaperbole ™, either.

[lostfan]

I've had quite a bit of interaction with federal employees to say the least, and although there is the joke/stereotype about them being lazy or whatever, most of them are just like anyone else who has an office job. They go to work every day, they have set tasks, they have performance reviews, they deal with the same kind of bureaucratic bulls*** other people have to deal with at work. I won't vouch for overall competence though, because there's a lot of factors that affect that and there are certainly some dumbasses running the show here and there (and nowhere do you see that more than in the military).

[Balta1701]

When Congress first created the TARP bailout, it required that the Congress had to approve any release of the 2nd half of the funds, so the current Secretary of the Treasury could only spend $350 billion without additional Congressional approval.

 

I'm sure you know where this is going. By multiple counts, we're up to about $358.4 billion pledged. And of course, Congress hasn't released the 2nd half yet.

 

Laws...HAH!

 

And for some more bailout fun while I'm at it...a few weeks back, Elizabeth Warren sent along a few questions to the Treasury about how they were using the money. Basically, the Treasury's reply winds up being some version of "Ha-Ha, you suck". An example:

The 13-page riposte is, by and large, an impressive example of using up white space while saying absolutely nothing. But a few excerpts stand out as noteworthy.

 

First of all, in response to Warren's question of whether the strategy is working to stabilize markets, Treasury says, in part:

Treasury is also monitoring the effects our strategy is having on lending, although it is important to note that nearly half the money allocated to the Capital Purchase Program has yet to be received by the banks. Treasury is executing at a rapid speed, but it will take some time to review and fund all the remaining applications. Clearly this capital needs to get into the system before it can have the desired effect. In addition, we are still at a point of low confidence - both due to the financial crisis and the economic downturn. As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans. As confidence returns, Treasury expects to see more credit extended. The increased lending that is vital to our economy will not materialize as fast as anyone would like, but it will happen much faster as a result of deploying resources from the TARP to stabilize the system and increase capital in our banks.

In other words, we originally said this whole bailout was necessary to increase lending, and it hasn't. But it still might "as confidence returns." (The fact that the bailout was supposed to be a key part of restoring confidence doesn't seem to have been considered.)

 

But now look at this: A few pages later, Treasury responds in part to Warren's question of what the banks are doing with the bailout money by essentially cutting and pasting the very same paragraph:

 

The CPP began in October 2008 and the money must work its way into the system before it can have the desired effect. Moreover, we are still at a point of low confidence - both due to the credit crisis and due to the economic downturn, during which lending and borrowing levels normally drop. While confidence is low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans. As confidence returns, we expect to see more credit extended. This lending won't materialize as fast as anyone would like, but it will happen much faster as a result of having used the TARP to stabilize the system and to increase the capital in our banks.

They're copying and pasting talking points to fill space. These people can not be gone soon enough.