What happens if we don't have 'Economic Bail Out' ??

I am barely an economic amateur, but I believe that the whole economic bail out is not only a bad idea, but criminal negligence on behalf of the government. I hear a lot of negatives on the bail out, but I don't hear anyone theorizing or explaining what might happen if the government didn't throw billions if not trillions of our dollars at this mess. So I decided to ask some of the enlightened minds here on ATS.

If the government did not bail out these banks and financial institutions, what would happen?

I am under the belief that the people would have to realize their mistakes and change the way they live life. The economy would recover and it would be a more permanent and stronger recovery than the 'quick fix' the government is offering. Plus, we wouldn't be expanding government control.

NO BLANK CHECK BAILOUT!!

Congress doesn't have to agree to a blank check. Instead, it can choose to impose a few sensible conditions on the bailout to ensure that it will be used responsibly.

Here are a few suggestions courtesy of Robert Reich:

1) If the taxpayers are shouldering the risk, the taxpayers should reap any eventual benefits. We accomplish this by giving the government an equity stake in every company we bail out proportionate to the amount we give them.

2) If we're paying (more than) our fair share, the CEOs and executives should have to, too. All of the fat cats who got us into this mess should relinquish their stock options and salaries until they start showing us, their investors, that they can once again be profitable. Future salaries should be linked to profitability.

3) NO MORE campaign contributions from Wall Street executives and PACs. Should taxpayer dollars be used to get our nation out of a crisis, they cannot be used to fund giant, powerful lobby operations that will be used to strong arm Congress into making bad policy.

4) BETTER REGULATIONS START RIGHT NOW! Wall Street can't expect to take thousands of dollars out of our paychecks without agreeing to increased transparency and more stringent oversight — the kind that might have helped avoid this mess to begin with.

5) Bankruptcy judges get broader leeway to help homeowners. Why should we lose our homes so the CEOs can keep theirs?

If Wall Street doesn't like these conditions, then it is welcome to find private investors to help it out of this debacle. But if American citizens are going to take this hit, then we must have a say in the terms of the deal — even if we don't have an army of high-paid lobbyists at our disposal like they do - We have elected representatives and they had better be listening to our voice!

Congress must take swift and prudent action to avoid making a burgeoning crisis that much worse. You can help by making your voice heard to Speaker Nancy Pelosi, House Majority Leader Steny Hoyer, Senate Majority Leader Harry Reid, House Finance Chair Barney Frank, Senate Banking Chair Chris Dodd, and the de facto leaders of the two parties: Senators Barack Obama and John McCain.

Tell our elected officials (there's not much time)that they are responsible to the taxpayers, not the Wall Street firms who line their campaign war chests.

We can't afford to write another blank check for George W. Bush.

reply to post by azureskys


AMEN! I couldn't agree more.

BTW, I just heard on my local NBC channel that the FBI is investigating
AGI, Fannie and Freddie, Lehman Bros and a couple more (I forgot which ones)
They didn't say much, just that they were being investigated.

Will be interesting to hear about this. But I'm not holding my breath.

reply to post by Wolf321



WOLF321, the Original Poster to this thread, asks a VERY good question
that 99% (or more) Americans couldn't answer, including yours truly.
What, if any, long-term negative impact would affect your average
family if we just let these companies file for bankruptcy, regorganize
and start anew, if they wish? It's happened several times to large
corporations (like United Airlines) in recent times.
-cwm

An economic Bailout?

HAHAHAHHA

Bush said the War would boost the economy. There WON'T be an economic Bailout. If he really was gonna bail us out, he would've done it a LONG time ago.

Bush WANTS the economy to collapse.

Originally posted by NeverSurrender
There WON'T be an economic Bailout. If he really was gonna bail us out, he would've done it a LONG time ago.

I think you are partly right. I think that there wont be an effective bail out. I think the whole thing is intended, probably just to further the governments control over us. I think the bail out plan is just a way to screw the people over further, making things to come even harder.

And I still haven't seen anything suggesting what be so bad if we didn't approve a bail out plan.

[edit on 24-9-2008 by Wolf321]

Originally posted by NeverSurrender
An economic Bailout?

HAHAHAHHA

Bush said the War would boost the economy. There WON'T be an economic Bailout. If he really was gonna bail us out, he would've done it a LONG time ago.

Bush WANTS the economy to collapse.

To add to that note, i dont know if any of you have seen the documentary "Farenheit 9/11"...but it talks about the many oil businesses that G.W. Bush headed...and every one of them was ran into the ground, though he made lots in profit.

Sound familiar to whats happening now?

Can someone just outline for me, a regular ole US Citizen, what would happen if we didn't bail out Wall St?

Would everything collapse as has been suggested on the news outlets (CNN et all?) and how would that affect everyday people like myself, with a mortgage, kids, and all the crap of everyday life?

Barking Mad

reply to post by Wolf321


The same thing that will happen if we do pass the bailout, but it'll happen sooner. The main difference being that the government may still be able to continue to fund itself if the bailout doesn't pass. If it does pass at some point in the not too far off future the bond market will collapse (causing interest rates to moonshot) along with the dollar (moonshot on comodities too), and quite possibly the government.If it does pass, say goodbye to anything Obama wants to do that would have to be funded by debt like national healthcare, infrastructure improvement, investment in alt energy, and quite possibly Social Security and Medicare/Medicaid. It could lead to a decade long deflationary recesion (like the Great Depression) or possibly a short violent hyperinflationary event (ala argentina, weimar Germany). Also if it passes IMHO a US default on debt is almost assured within ten years.

If it doesn't pass the market will collapse, but the government may be able to ringfence itself and preserve its abillity to conduct operations. The chances of default are less. Things will still suck but not quite as bad as they will if it passes.

Yes, but let's get back to the original question which has been posed here, what happens if we do...nothing?

I also know next to nothing about economics so I may be completely off the mark, but it seems to me we'd have many if not most of our financial institutions freezing up and either failing or hording. We'd have to create liquidity somehow, so people and businesses can get legitimate loans. Does that mean nationalizing these institutions?

Perhaps this is the perfect opportunity to put the brakes on this runaway economy, take over the banks, yes, by the government, with SEVERE oversight and regulation by transparent, REALLY transparent congressional committees, for a hopefully short period of time until things stabilize and we can come up with ways to plug up the loopholes that let this happen in the first place.

As for bringing the bad guys to justice, while I'd love to see it, I think the corruption is so widespread and in our financial culture so deeply that those who have broken the law may not have considered it any big deal, people like you and me. So you lie a little on the loan application, it's no worse than inflating those tax deductions or expense accounts. Thoughts?

Originally posted by carewemust
reply to post by Wolf321

 

WOLF321, the Original Poster to this thread, asks a VERY good question
that 99% (or more) Americans couldn't answer, including yours truly.
What, if any, long-term negative impact would affect your average
family if we just let these companies file for bankruptcy, regorganize
and start anew, if they wish? It's happened several times to large
corporations (like United Airlines) in recent times.
-cwm

Simple.

A Depression.

If the banks fail, the money disappears, you get locked out of the banks, the banks go under and you have no money..the FDIC can insure 52 billion at the moment, but that would be a fraction of what some banks, like Citi, would be in deposits.

Mutual funds would collapse.

401K's would collapse.

Pensions would collapse.

Tax revenue would drop.

Unemployment would spike.

We would default on our National Debt.

If that is, the situation is as bad as they claim it is. Perhaps they are scaring us into letting them give 700 billion to their buddies, I don't know..

But if you study historical economics, you will see the Great Depression was caused by a culmination of several things..

Restriction of Credit, liquidation of banking assets, equity collapsing, wealthy investors fleeing the markets in droves to save as much net worth as possible.

Of course, the 1929 market crash was a sudden event, the current markets automatically shut down is a certain percentage is lost .. meaning all assets are frozen for a "cool down" period. After the 1929 collapse, it was mostly uphill from there (stock wise)..

I think it's obvious they are scared of something, and the markets are waiting for an answer.. no bail out and stocks plummet, yes and stocks go through the roof. Those with money are sweating on their 50/50 bet.

My bet.. is that the bill passes.

If the government did not bail out these banks and financial institutions, what would happen?

Answer:

The private bankers that run and control the federal reserve will not asset into their power even more banks. Yes my friend their is nothing about the federal reserve. The federal reserve is as federal as FedEx. Do some research if you don't believe me.

I would say that I hope you have good friends and family to depend on. I hope you have food, some gold, silver, clean water, and the means to secure it. Thank you for the chance to read this blog, who knows what will happen just need to be able to fend for yourself and depend on nothing from the Gov't. GOD BLESS the u.S.A! Peace

Well, it depends what they do instead if they don't pass this. If they do nothing we are toast, if they pass it we are toast.

What if they did this?

KD's Solution

The solution is simple, it is elegant, and it will work.

Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now.

Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy.

Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly.

An explanation and the repercussions are explained on the link.

Just an example of an alternative that doesn't ruin the nation and spill over into the rest of the world. But noooooooo!!!!!!!! For some reason we have to write a 100 page long Bill that helps the people who got us into this mess.

[edit on 9/28/2008 by Relentless]

reply to post by Anonymous ATS


What would happen if there is no bail out? Well it's hard to say, but there are at ;east twp possible scenarios.

1.) worst case: Banks default on their loans, credit lines dry up, housing market completely crashes. No one is able to buy or sell homes, Banks call back business loans ahead of schedule, employers are unable to pay their bills or employee salaries, unemployment rates and foreclosure's skyrocket. Stock market completely crashes, Peoples 401k and retirement funds evaporate. Crime rates rise. We enter a Great(er) Depression.

2.) Many banks fail, Stock market declines. Better seated banks and investors step in and purchase the undervalued stocks and bank ownerships. There would be a lot of money lost by everyday Americans with money invested in the stock market, home prices would decline. The market would then stabilize and begin to grow in a healthier fashion.

I personally believe that if there is no government bailout, scenario 2 would be much more likely with investors such as Buffet that has funds available to take advantage of the opportunities that would present itself. It would be painful to most people, but the market would correct itself and begin to prosper again. The hardest hit will be people that purchased homes in the last few years and need to sell soon, and also those that are in, or will soon be entering retirement and are immediately requiring funds from their 401k accounts.

I am wondering if the bail out passes.... and things are better.
How long will it last? Are we setting outselves up for a much larger inevitable crash?
If so, I think its a terrible idea.
I would have to vote no, even though it would be hard on me and others.
I would rather have the downturn now, than go through it again.

What are the economics on that? Will it crash anyways? even with the bailout?