$700 Billion Bailout

[lostfan]

I think it is a great plan. The housing industry is the problem with the economy. Anything that would allow a homeowner to cut their payment, if Sen. Ensign's figures are correct, by $400/mo or more, is an instant tax cut without the stigma of a tax cut. The amount of money that would flow into the economy from this would be substantial.

I suppose a drop in revenue to stabilize things is better than just seeing more foreclosures where they'll lose the money anyway. I wonder how this idea will get received?

[NorthSideSox72]

So what kind of odds will I get for a TARP III and TARP IV this year.

 

Also, Sen. Ensign was on CNBC this morning and said the Repubs would like to put a plan in place that would allow every homeowner to re-finance for 4%. Every homeowner would qualify. On avg., he said it would save the homeowner $400/mo.

Now THAT seems like a good use of TARP/bailout/stimulus money.

 

ETA: One danger though, this would temporarily slow down people buying new homes. If they refinance at 4%, they are less likely to move into new homes when they won't get that rate. Just somethign to consider.

 

[NorthSideSox72]

Ugh. I realize that "BAILOUT" is the word of the day, and that it's taxpayer funded... but they have no right to tell them how to do business.

I disagree in this case. You take 10's of billions of taxpayer dollars, then guess what? You have a new boss, a new plurality stockholder, some new members of the board. So you better believe you now answer to them to some extent.

 

If this was a company going about its business without the government propping it up, then I would agree with you 100%.

 

[Cknolls]

Based on the economic climate of the last 12 months that plane should have been scratched off their wish list several months ago. They didn't need to wait until the Obama administration pressured them.

 

 

Waiting for Obama administration to pressure the owners of ONE BANK UNITED to sell the house they own on the Pacific Ocean. Actually the house is owned by an LLC that is headed by the owner and his wife. The bank also pays for a Porsche for this guy.

 

It will probaly be on the news tonight. Or maybe we have to ask Barney Frank.

[Balta1701]

I think it is a great plan. The housing industry is the problem with the economy. Anything that would allow a homeowner to cut their payment, if Sen. Ensign's figures are correct, by $400/mo or more, is an instant tax cut without the stigma of a tax cut. The amount of money that would flow into the economy from this would be substantial.

Depending on how this is structured though, there's a potential risk there to drag this whole housing collapse out longer, and I'm not sure that's a good thing. A number of different suggestions have come out along these lines, to help more people buy homes, to have the government take up some of the slack in the housing market, etc. I think the reality in that market is that the prices got so far beyond what people could afford with their normal salary that home prices are going to drop to the point that an average person earning an average income in a market is going to be able to afford an average house, and they're not going to stop until they get there, regardless of any programs who have the goal of keeping prices up. It depends on how you structure it whether this would work.

 

And of course...you'd have an awful lot of resistance from the banks. One of the big problems with this whole mess is that these mortgages have been chopped up and sold off a dozen different ways, which has made government refinancing programs very ugly already, because every one who holds a mortgage winds up needing to agree before something is rewritten. Although that is the nice thing about the government...it's pretty good at forcing companies to do things, that doesn't mean they'd like it

[Cknolls]

What restrictions will be put on the states that are given TARP money? My guess is none.

 

[StrangeSox]

What restrictions will be put on the states that are given TARP money? My guess is none.

 

Aside from "No Blago," of course!

[Cknolls]

How about any baseline budget item that increases in the stimulus has to be retroactive to 2008's baseline?

[Cknolls]

Before he was appointed to be the head of the White House’s National Economic Council Larry Summers wrote (thanks to The Atlantic for the link):

 

Poorly provided fiscal stimulus can have worse side effects than the disease that is to be cured. This suggests close attention to three issues:

…

Third, fiscal stimulus, to be maximally effective, must be clearly and credibly temporary – with no significant adverse impact on the deficit for more than a year or so after implementation. Otherwise it risks being counterproductive by raising the spectre of enlarged future deficits pushing up longer-term interest rates and undermining confidence and longer-term growth prospects.

 

 

 

[kapkomet]

Before he was appointed to be the head of the White House’s National Economic Council Larry Summers wrote (thanks to The Atlantic for the link):

 

Poorly provided fiscal stimulus can have worse side effects than the disease that is to be cured. This suggests close attention to three issues:

…

Third, fiscal stimulus, to be maximally effective, must be clearly and credibly temporary – with no significant adverse impact on the deficit for more than a year or so after implementation. Otherwise it risks being counterproductive by raising the spectre of enlarged future deficits pushing up longer-term interest rates and undermining confidence and longer-term growth prospects.

But now, it's all different. The Democrats have to save us all.

 

[Balta1701]

But now, it's all different. The Democrats have to save us all.

Actually, it could well be different this time. A fiscal stimulus in a typical recession, one that is expected to be short and in which the federal reserve has sufficient ammunition left in its clip would follow that definition exactly. One could in fact argue that by continuing the fiscal stimulus in the form of deficits after the 2002 recession, the exact negative result he predicted was created.

 

A true liquidity trap recession on the other hand, where one reaches the point that there is nothing left that the federal reserve can do with monetary policy and where one is expecting the recession's length to be measured in years rather than months is truly a different beast and must be understood that way.

[NorthSideSox72]

But now, it's all different. The Democrats have to save us all.

It is different. Its already a lot different. But some people choose to believe that if Obama isn't completely, 100% transcendent, that must mean he is exactly the same as Bush.

 

Reality is, he is and already has been different. But not in every way. And he certainly hasn't been keeping all his promises either.

 

[kapkomet]

Actually, it could well be different this time. A fiscal stimulus in a typical recession, one that is expected to be short and in which the federal reserve has sufficient ammunition left in its clip would follow that definition exactly. One could in fact argue that by continuing the fiscal stimulus in the form of deficits after the 2002 recession, the exact negative result he predicted was created.

 

A true liquidity trap recession on the other hand, where one reaches the point that there is nothing left that the federal reserve can do with monetary policy and where one is expecting the recession's length to be measured in years rather than months is truly a different beast and must be understood that way.

But you can't throw so much money at it that you can't see the s*** on top of your head for the next 50 years.

 

There is a fine line... one that the Democrats don't want to think about - this is all about HOW BAD IT IS so that they can get their giftwrapped s*** forced down our throats. This isn't about "stimulus", this is about getting money back to China and Saudi Arabia.

 

[NorthSideSox72]

But you can't throw so much money at it that you can't see the s*** on top of your head for the next 50 years.

 

There is a fine line... one that the Democrats don't want to think about - this is all about HOW BAD IT IS so that they can get their giftwrapped s*** forced down our throats. This isn't about "stimulus", this is about getting money back to China and Saudi Arabia.

First, its not "the Democrats", its "the great majority of both parties". Second, that last sentence... WTF?

 

[kapkomet]

First, its not "the Democrats", its "the great majority of both parties". Second, that last sentence... WTF?

No, you're right. Our government wants control of it all. It's not about party anymore.

 

Second, think about it.

 

[NorthSideSox72]

Second, think about it.

I did. And now my head hurts. What are you getting at?

 

[mr_genius]

It is different. Its already a lot different. But some people choose to believe that if Obama isn't completely, 100% transcendent, that must mean he is exactly the same as Bush.

 

Reality is, he is and already has been different. But not in every way. And he certainly hasn't been keeping all his promises either.

 

This new stimulus plan is a travesty. But I've given up, it's going to take a monetary collapse to stop the spending. Unfortunately, things have been put in high gear; annual deficits of 2 trillion are seen as nothing now.

[southsideirish71]

Stimulus or Pork

 

10 reason to whack the Obama Stimulus Package

Edited January 27, 2009 by southsideirish71

[Balta1701]

Stimulus or Pork

 

10 reason to whack the Obama Stimulus Package

Not going to deal with all 10...but there's a few really, really blatant ones in there.

Massive stimulus didn't work in the Great Depression. As this Heritage Foundation study notes: "After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940. That same year-- 10 years into the Great Depression--America's unemployment rate stood at 14.6 percent." Same goes for Japan and its Great Stagnation of the 1990s.

What's being left out there is the path that unemployment actually took. They give you the numbers for where government spending starts and finishes...they give you the number that unemployment finishes at...but they don't tell you where unemployment starts at. They leave out that unemployment started at what, 25%? And then declined at 1.5% a year to get to 14.6% within 7 years? A 1.5% drop in unemployment per year is pretty darn good in most times. And in particular, it's worth noting that the big surge in government stimulus was between 1933-1936, after which, the President started listening to the Republicans and tried to balance out the federal budget. The actual unemployment rate declined from 24.9 to 14.3% between 1933-1937, and actually jumped back to 19% when the budget was moved closer to being in balance. In other words, the New Deal stimulus programs, which happened before we even had Keynes's manuscripts, dropped the unemployment rate by about 3% a year until they were scaled back. That is really awful data manipulation.

 

One more

Economist John Taylor thinks it better to let the Federal Reserve deal with the short-term problems in the economy, while fiscal policy should attend to long-term issues: "In the current context of the U.S. economy, it seems best to let fiscal policy have its main countercyclical impact through the automatic stabilizer ... It seems hard to improve on this performance with a more active discretionary fiscal policy, and an activist discretionary fiscal policy might even make the job of monetary authorities more difficult. It would be appropriate in the present American context, for discretionary fiscal policy to be saved explicitly for longer-term issues, requiring less frequent changes. Examples of such a longer-term focus include fiscal policy proposals to balance the non-Social Security budget over the next ten years, to reduce marginal tax rates for long run economic efficiency, or even to reform the tax system and Social Security."

I totally agree with this and I think most economists in the world probably would in some fashion also agree that the main monetary instrument to deal with short-term economic problems should be the Federal reserve, and that the government should work on the longer term issues. The problem is...in this case, the fed is already out of ammo. The fed dropped interest rates to nearly zero in December. It has run out of ammunition. Failing to understand why that makes this recession different and why this puts us on the border of a true deflationary spiral is a huge mistake.

[kapkomet]

Not going to deal with all 10...but there's a few really, really blatant ones in there.

 

What's being left out there is the path that unemployment actually took. They give you the numbers for where government spending starts and finishes...they give you the number that unemployment finishes at...but they don't tell you where unemployment starts at. They leave out that unemployment started at what, 25%? And then declined at 1.5% a year to get to 14.6% within 7 years? A 1.5% drop in unemployment per year is pretty darn good in most times. And in particular, it's worth noting that the big surge in government stimulus was between 1933-1936, after which, the President started listening to the Republicans and tried to balance out the federal budget. The actual unemployment rate declined from 24.9 to 14.3% between 1933-1937, and actually jumped back to 19% when the budget was moved closer to being in balance. In other words, the New Deal stimulus programs, which happened before we even had Keynes's manuscripts, dropped the unemployment rate by about 3% a year until they were scaled back. That is really awful data manipulation.

 

One more

I totally agree with this and I think most economists in the world probably would in some fashion also agree that the main monetary instrument to deal with short-term economic problems should be the Federal reserve, and that the government should work on the longer term issues. The problem is...in this case, the fed is already out of ammo. The fed dropped interest rates to nearly zero in December. It has run out of ammunition. Failing to understand why that makes this recession different and why this puts us on the border of a true deflationary spiral is a huge mistake.

 

Re: your last point, I think that's not too bad of thinking. I don't think the Fed is totally out of ammo yet, because I think there's some other things that they can do. I hope they don't have to go much further then they have, but I get the nasty feeling that they will... the part that hasn't even been TOUCHED yet is the personal credit slide (forget the housing slide - personal credit makes the housing market look like a pimple on an elephant's ass - and that's the next major meltdown.) When that hits, look the f*** out because there's not a hell of a lot that will survive.

 

 

 

[Balta1701]

Re: your last point, I think that's not too bad of thinking. I don't think the Fed is totally out of ammo yet, because I think there's some other things that they can do. I hope they don't have to go much further then they have, but I get the nasty feeling that they will... the part that hasn't even been TOUCHED yet is the personal credit slide (forget the housing slide - personal credit makes the housing market look like a pimple on an elephant's ass - and that's the next major meltdown.) When that hits, look the f*** out because there's not a hell of a lot that will survive.

And one way to prevent that...of course...is an appropriately arranged and very, very large fiscal stimulus policy from the federal government, which pushes people back in to work and cuts off the cycle of job losses leading to credit collapses.

[kapkomet]

And one way to prevent that...of course...is an appropriately arranged and very, very large fiscal stimulus policy from the federal government, which pushes people back in to work and cuts off the cycle of job losses leading to credit collapses.

Yes, and no. LIke I said, I don't think anyone knows what's really going to happen because we've never seen anything like this before.

 

[southsider2k5]

Re: your last point, I think that's not too bad of thinking. I don't think the Fed is totally out of ammo yet, because I think there's some other things that they can do. I hope they don't have to go much further then they have, but I get the nasty feeling that they will... the part that hasn't even been TOUCHED yet is the personal credit slide (forget the housing slide - personal credit makes the housing market look like a pimple on an elephant's ass - and that's the next major meltdown.) When that hits, look the f*** out because there's not a hell of a lot that will survive.

 

The interesting thing they have never touched that would end the "crisis" in a heartbeat is the reserve requirements.

[Cknolls]

that the big surge in government stimulus was between 1933-1936, after which, the President started listening to the Republicans and tried to balance out the federal budget.

 

 

All 25 Repubs in the Senate in 1935-1937 or the 17 in the Senate from 1937-1939? Or maybe its the 103 Repubs in the House in 1935-1937 and the 89 in the House from 1937-1939. As Opposed to the 69 DEM Senators in 1935-1937 and 75 DEM Senators in 1937-1939. Or maybe its the 322 DEM reps in the house in 1935-1937 and the 333 DEM REPS in the HOUSE in 1937-1939.

 

Who ever knew? Roosevelt was such a good listener, he was persuaded by two of the largest minorites in the history of Congress to balance the budget. Nice try. I'll sell that excuse though.

 

Kind of the same excuse I would expect to follow for the Messiah.

[kapkomet]

The interesting thing they have never touched that would end the "crisis" in a heartbeat is the reserve requirements.

Maybe they are saving that for the personal credit side. Because like I said, if that goes, that's going to make the housing bubble look nice and rosy.