Bailout Plan to Cost $6K Per Taxpayer!!! Is It Worth It?!

The big news this weekend is Hank Paulson put a $700 billion price tag on a bailout package designed to prevent a financial market crisis from becoming an economic calamity. Paulson's plan would require Congress to raise the U.S. debt limit to $11.3 trillion. Don't forget it was just in July when the debt limit was raised by $800 billion to $10.6 billion as a result of the Housing Bill. On that basis, the cost of the bailouts thus far is $1.5 trillion - and counting. But the newly proposed $700 billion Troubled Assets Relief Program (TARP) "ultimately may not cost us anything - that's certainly the goal," Liz Ann Sonders, chief investment strategist at Charles Schwab says in the accompanying video, echoing Paulson's comments this weekend. Sonders, and others, cite the Resolution Trust Corp. experience in the late 1980s-early 1990s as evidence that the government can possibly turn a profit on this bailout. While that's theoretically possible, "the devil is in the details," she admits.

This is just great ... $6K of my money to make up for corporate scums trying to make big paychecks, causing their companies money to vanish, then the mighty government is letting them do it and making us pay for it. Is it really worth it?

P.S. this isn't about the bailout ... just the cost of it for people.

http:// quote.yahoo.com/tech-ticker/article/yftt_67605/Bailout-Cost-6K-Per-Taxpayer...Or-Nothing-at-All?tickers=XLF,AIG,FNM,FRE,GS,MS,SCHW

[edit on 22-9-2008 by baseball101]

[edit on 22-9-2008 by RealityisanIllusion]

Originally posted by baseball101
This is just great ... $6K of my money to make up for corporate scums trying to make big paychecks, causing their companies money to vanish, then the mighty government is letting them do it and making us pay for it. Is it really worth it?

P.S. this isn't about the bailout ... just the cost of it for people.

http:// quote.yahoo.com/tech-ticker/article/yftt_67605/Bailout-Cost-6K-Per-Taxpayer...Or-Nothing-at-All?tickers=XLF,AIG,FNM,FRE,GS,MS,SCHW

[edit on 22-9-2008 by baseball101]

That's $200 a year if the bailout turns out to be a complete loss and the government decide to collect the money within 30 years. If your payments are extended to 60 years, you will hand over $100 a year through higher taxes (not adjusted for inflation.) You should remember that the bailout is essentially a loan to the financial institutions -- they are expected to pay back on very easy terms. So at this moment you really don't know how much it will cost you to be an American citizen in the new millenium.

reply to post by stander


WRONG --

The US Government "bailed" Freddie and Frannie by covering negative balance sheets for a minimum of one year.. once it becomes profitable they are expected to become "public" once more, and to "repay" the Treasury in the form of instalments through porfits for an unlimited time frame..

Bear Sterns was torn apart and sold off to other banks.

AIG was given an $85 billion dollar LOAN at near zero interest to be paid back over an unspecified amount of time.. the Government not forcing a sale of any part, nor aquiring any part of AIG.

This new bail out is actually the OFFICIAL PURCHASE OF MORTGAGE BACKED SECURITIES FROM BANKS TO THE MAXIMUM SUM OF 700 BILLION DOLLARS ALLOCATED TO THE INVESTMENTS AT ANY ONE TIME!

This is NOT a loan. This is not a Fire Sale. This is the official purchase of securities.

Investment banks make money by buying a mortgage and selling it for more then they bought it for, the one buying it buys the mortgage to accumulate the interest payments. Various securities are sold to fund the purchases these banks made to buy and sell the mortgages.. when a mortgage defaults, the loss is subtracted from the securities sold to enforce these mortgages..

The Federal Government will be buying the investments sold by investment banks that backed the mortgages, a massive tangle of debt that was completely unregulated.. This is the "toxic waste" they speak about. They will also be buying Toxic Sub Prime Mortgages to take them and their negative effect on bank Books. The mortgage will then lapse, foreclosed and sold by the HUD of the US Government for a fraction of the cost.

THIS IS NOT A LOAN.

In business, when you take a risk like that, you get the rewards.

Is it worth it to us: NO!

We will not be the recipients of a dividend check amounting to the rewards.

We are being asked to swallow toxic waste as medicine for rich men suffering from radiation poisoning, so they will not have to.
We should be getting all of their holdings, not just the toxic ones.
This is a sweetheart deal. Not for our benefit, it is for their benefit.

If the government simply put the companies into a state of receivership with government oversight, where all profits go to "We The People". Until the debt is paid off with interest, not our usual interest but the interest banks would get from you as a high risk borrower. Meaning 25% per anum.

That would be making the Banks slaves to the people for a change. Then it would be a good and reasonable deal. Even that would not be a great deal in business terms, or you would be seeing other banks swarm for the opportunity to takeover the whole enchilada. When other banks do not want to take the risk of absorbing everything at firesale prices then taking only the toxic is just a last feast for the fat cats before the fall.





[edit on 22-9-2008 by Cyberbian]

reply to post by Rockpuck

Well, it's not exactly the investment loan as we know it. I just offered a pillow to sit on a hard rock. I can't no longer find the link that details the terms of the rescue package. If I find it again, I post excerpts.

So you belive that the vacant $300,000 houses lost their value and don't represent any asset?

Originally posted by Rockpuck
reply to post by stander

 

WRONG --


THIS IS NOT A LOAN.

I've found a substitute . . .

What will it cost?

This is the key question, and there are no answers yet. The $700 billion figure represents the government's initial outlays for buying bad debt. The ultimate cost will depend on how much the government is able to get for the bad assets it receives. Estimates of the program's cost are all over the map, ranging from taxpayer losses amounting to hundreds of billions of dollars to an actual profit.

"Nobody really knows how this is going to work," said Zachary Karabell, president of the New York economic consulting firm River Twice Research.

Much depends on the price the government pays financial firms for bad assets. If it pays too much, the taxpayers would take a hit and firms would get bailed out more than is necessary to restore the financial system. If the feds pay too little, then lenders remain crippled and unable to do their job of providing credit to the economy.

www.sfgate.com.../c/a/2008/09/22/MNA0132PR9.DTL

Why don't you dig into this a bit before going upper-case?



It's not really a loan; it's a gamble.


[edit on 9/23/2008 by stander]

Originally posted by stander
reply to post by Rockpuck

 

Well, it's not exactly the investment loan as we know it. I just offered a pillow to sit on a hard rock. I can't no longer find the link that details the terms of the rescue package. If I find it again, I post excerpts.

So you belive that the vacant $300,000 houses lost their value and don't represent any asset?

Investment securities that backed a mortgage are not the mortgage it's self..

If someone has a first mortgage, then takes out a line of equity, then default on both, assumes a third mortgage on the total value of the house to off set the cost of the first two mortgages, then declares bankruptcy ... who gets the house? The third Mortgage, and the first and second are assume by the third corporation, which then has to write down 2 mortgages on their balance sheets..

It's idiotic crap like that which the Gov is wanting to buy.. that and "jumbo" loans that Freddie and Fannie could not secure.. so banks resorted to selling funds and securities to assume the funds needed to back such a mortgage..

Mortgage fails.. bank keeps the house (or sold through HUD if the Gov takes it) but who takes care of the investments that raised the cash to support the massive mortgage? No one, banks and investment banks wrote them down .. not anymore, Big Brother will take them.

This has nothing to do with actual properties. Has to do with DELINQUENT (in process of Foreclosure, but not Foreclosed) loans causing massive profit losses on investment vehicles.. When the Gov says "200k new Foreclosures this month" it only means 200k households are officially 60-90days delinquent on payment.. all securities raised to fund the issuing or purchase of these mortgages then suffer severe losses.

Which is also why mainly investment banks, or investment arms of companies (like AIG) are the ones in big, big trouble..

It has nothing what so ever to do with "basic or normal banking procedures" which a mortgage is pretty damn basic.

reply to post by Rockpuck

What I wanted to show is that the 700 billion may not be a complete loss to the taxpayers, as Zachary Karabell pointed out.

You are right saying that multiple mortgages devaluate the price of the houses. It all depends on how much asset is still out there to know what the Feds are going to buy and how much the tax payers are stand to lose.

The AMR going up turned the housing market into something resembling the stock market with its consequences.

The Vikings went through a similar problem and came out of it just fine. But they implemented a different bailout technique.
www.cnbc.com...

How will this "help" the tax payer is a (hopeful) assumption that if the US Treasury and add 700billion DIRECTLY into the markets they can stabilize the massive wealth loss occurring from poor investments..

This meaning, if Corporation A gets to sell $50billion in poor securities that are bringing down profits, and break even off it their next quarter will then reflect their books without those deficit securities = higher earnings and thus, higher stock prices. Once this happens, capital can flow back into these desicrated institutions and through this the tax payer will have credit more easily accessible..

This of it as... we are all sitting in a Canoe.

Our canoe was slowly filling with water because we hit a rock and punctured a small hole in the bottom. Water from the bottom fills the Canoe to the rim..

We splashed as much out as we could with our hands, desperately trying to stay afloat.. but to no avail, we still sink..

So we take our bucket (700billion) and begin dumping out the water (all those toxic securities) out of the Canoe, to stay afloat.

See a problem? When the energy consumed to stay afloat wear low, the water can overtake us at any time, a delay of the inevitable. No one stopped the leak..

Notice how the Government has NOT said NO MORE mortgage backed securities? .. Because without them, average joe cannot buy his $500k McMansion, and without home sales to bolster consumer confidence the entire economy lags..

They just want to throw $700billion dollars to cancel debts to make corporations APPEAR to be profitable..

Complete loss to the tax payer? No, because if this bill does NOT pass, expect unemployment to skyrocket, and expect credit lines to freeze. If it does.. expect all I just said only 6 months down the road. New president, hey how about that!

(ps the Vikings where wiped out....)

reply to post by stander


this isn't a loan they're buying the businesses out and where will all of this money come from? us the taxpayers ... i never thought about it but i'm guessing the u.s. is going to take out a loan from somewhere to buy out these companies??? if they are, i know they get very very good interest rates, then this will add on to the loan eventually making us pay even more then $700 billion and whats to say that some of the "higher ups" won't take their fair share of the money ... there's plenty of it to go around in their eyes.

The securities will be purchased through the Treasury, through tax dollars, or through other accounts such as Social Security (with the promise to pay SS back..) .. also they will sell bonds and other safe securities to fund the "project" .. which what our "national debt" is..

This "Bail Out" issue is quickly becoming the #1 story and our two
Presidential candidates are showing NO LEADERSHIP whatsoever!

The entire debacle seems to be the fault of incompetent corporate
leadership. Why should we bail them out? Other companies have
filed for bankruptcy, reorganized and started fresh. What's wrong
with letting financial firms take these self-bailout actions, like
United Airlines did?

Anyway, whichever one of our two Presidential candidates comes
out AGAINST this $700b to $1trillion rescue "plan" will get my vote
in November. Obama said this week that if the plan is enacted,
and he becomes President, he will have to delay introducing the
parts of his economic programs that cost money... which means
his "Changes We Need" will be mostly negative, cost-cutting changes.
Based on his dialogue this week, it appears that Barack Obama will
be the one with enough guts to publicly denounce the bailout plan.
If so, the man gets my vote on 11/4/08.
-cwm

Originally posted by carewemust
The entire debacle seems to be the fault of incompetent corporate
leadership. Why should we bail them out? Other companies have
filed for bankruptcy, reorganized and started fresh. What's wrong
with letting financial firms take these self-bailout actions, like
United Airlines did?

Well, that's because they're financial firms, not carriers. There is a difference, even though not apparent, because Chapter 11 is for everyone.

There is an article -- kinda scholarly -- that tends to explain the options and at the same time clues the difference between UA and AIG.
economistsview.typepad.com...

Here is an excerpt that is interesting:

I mean, any bank that wants to remove toxic assets from its balance sheet can do it at a stroke - just declare them worthless, and poof! they're gone. But of course, that would reduce confidence and capital, not increase it - and that's not what Hank and Ben are talking about. They're talking about turning the assets over to Uncle Sam, and getting cold hard cash in return. And then the question is how much cash they get in return. It's all about the price.

See, there are two ways to dump toxic waste into the ocean: you just dump it as it is (poof), or you build a water treatment plant not to poison the marine life. The latter choice may cost you $700 billion, though.