bank rates

Politics + Economics = Armageddon

How did Congress NOT pass the bailout package?!? Are they stupid or are they crazy? or maybe they are selfish and are simply seeking re-election?

Since when are Capitol Hill pen pushers, who have absolutely no understanding of the daunting $500+ trillion derivatives bubble, qualified to vote on what is best to save the economy?

Who do YOU think is more qualified to make economic decisions?
Nancy Pelosi, a hippie from San Francisco? or Secretary Paulson, the former CEO of Goldman Sachs??

A $700 bn bailout may not be the best nor most popular fix, but Rep. Hoyer sums it up best: “Inaction will result in greater pain for our people and our country.”

Had Democrat Pelosi not tried to play the role of the righteous, great American savior to the taxpayers, perhaps the outcome would have been different.

If you’ve been following Bankaholic for the last year, you will know how critical I am about government intervention in free markets (ie, socialism), but at the very least, SOMETHING has to be done to rescue the world.

Congress REALLY screwed up.

Congress was more concerned with getting re-elected than with saving the world from financial armageddon.
With elections coming up in 5 weeks, no law-makers want to be known as the dude who voted YES to shift a $700 billion burden onto the taxpayers.

The stock market will be red with blood. Circumstances will get worse before they get better. To make things worse, the SEC’s insanely stupid banning of short selling means that there will no longer be any 300+ point short covering squeezes to provide short term rallies in stocks.

I suggest you start looking into safehaven investments.

>> Also think of it this way. The vote wiped $1.4 trillion off the stock market within minutes—Paulson only wanted $0.7 trillion.

This is an open debate, please leave your comments.

Don't miss out on the next bank deal. Get the newest deals delivered straight to your inbox!

Comments (42)
1 Star2 Stars3 Stars4 Stars5 Stars (32 votes, average: 2.81 out of 5)
Loading...
42 Existing Comments
  1. Debbie said:
    on September 30th at 02:42 am

    Um… before you go wailing about Pelosi… she was in SUPPORT of the bailout plan. It was republicans crying socialism that blocked this from happening. The bailout plan was rejected by something like 60 percent of Republicans. You yourself, a person who does not support intervention, agrees something needs to be done. Republicans more concerned about being re-elected than about this country’s economic future are the reason why the bailout failed.

    And please don’t make the argument that a completely status quo Pelosi partisan speech about the GOP’s failure to regulate is the reason why the bill failed]. I’m sorry, shouldn’t the GOP have a thicker skin, and vote based on whats best for their country, and not let a little partisan spittle get in the way? I’m not a huge fan of Pelosi myself, but even I know that your constant blaming and belittling of her is unwarranted.

  2. Newgrad said:
    on September 30th at 02:53 am

    I think Nancy Pelosi has done a good job. The economy bubble has already bursted. It is just illusion. Why not save the US tax payers $700 billion?
    I don’t have 401K, IRA or any form of investment. I have nothing but student loan and credit care debt, so I guess I have nothing to lose. Thanks to Bush Adminstration.

  3. gary said:
    on September 30th at 02:59 am

    in the interested of “open debate” i would hope you’d at least open with an article that was based in fact. while some point to Pelosi’s pre-vote speech as having swayed some Republicans into voting against the bill, she, in fact, voted FOR the legislation. in fact, more Republicans voted against it than Democrats (133-95). Republicans voted more than 2-1 to oppose the bill. so, while you may not be a Pelosi fan, your criticism is ill-directed in this case.

  4. Johns Wu said:
    on September 30th at 02:59 am

    Yes, the economy bubble has busted, but there is still a $700 trillion derivatives bubble that is just waiting to burst.

    Also I don’t blame Bush Administration. They’re just paper pushers. I think we should be pointing the finger at Greenspan / the Federal Reserve. Clinton also deserves some blame for his role in repealing the provisions of that Glass Steagall Act.

  5. McCool said:
    on September 30th at 03:03 am

    We should be pissed off at the people who we, the taxpayers, are being asked to bail out with $700 billion, when my local high school can’t even afford pencils or continue art and auto shop classes.

  6. MarkPDX said:
    on September 30th at 03:15 am

    Thanks for outing yourself Johns Wu. I had no idea I Was subscribed to a wing-nut who is all too willing to let the bums who got us into this fix try and bail us out. Punch up this article from the world’s leading economist, with a few nobel prize winners included, who seem to disagree strongly with one Johns Wu.

  7. MarkPDX said:
    on September 30th at 03:16 am

    http://executivesuite.blogs.nytimes.com/2008/09/25/economists-of-the-world-unite/

  8. smarter than wu said:
    on September 30th at 04:31 am

    John, you’ve just lost a lot of readers with your ranting. I used to like this site, but I have just lost ALL respect for you. I suddenly have no idea what your credentials are, but they are not strongly grounded in either reality or market economics. Stick rating bank deposit rates and credit card offers.

  9. Silence Dogood said:
    on September 30th at 04:40 am

    You are absolutely right! Paulson is great witht money. He’s been doling it ever since he got a job with Elrichman paying burglars for Nixon’s Watergate break-in.

  10. LiveWellSimply said:
    on September 30th at 04:46 am

    I’m actually of the opinion that they made a good choice. Here’s why.

    Scenario 1: the bailout gets passed and the stock market falls.

    Scenario 2: the bailout doesn’t get passed and the stock market falls…hard, real hard…

    So either way the stock market will go down. Only difference is, all that debt stays in the hands of the financial institutions and doesn’t get strapped to the backs of tax payers. And eventually, the market will reach bottom and begin the slow climb up to “normal” levels.

  11. Newgrad said:
    on September 30th at 06:10 am

    I totally agree with u. The bail out plan can only buy some time for those bottom feeders, who have been making obscene money from the home owners, students, baby boomers, and etc. But the stock and housing market will continue to fall hard anyway. I do believe the maket will reach bottom and may take years to recover to a reasonable level. Its totally WRONG to waste our taxpayers’ money for those irresponsible financial institutions and innocent/greedy homebuyers.

  12. Johns Wu said:
    on September 30th at 06:28 am

    Looks like this article has stirred up some debate!

    Something has to be done to defuse the derivatives time bomb. The $700bn bailout may not be the best plan, but that’s b/c theres no EZ solution. Haters will argue that future generations of Americans will be footing the bill over the next 100 to 300 years, but the alternative is for OUR generation to re-live the great depression over the next 10 years!

    I invite pencil pushing economist PhDs, to come up with a REAL solutions rather than criticizing real proposals.

    For starters, one alternative is to force financial institutions to cut dividends on their stock, using the billions they save to cover their obligations.

  13. Michelle said:
    on September 30th at 11:58 am

    Same here, Tom B. Very disappointing.

  14. Efram said:
    on September 30th at 12:10 pm

    I’ve been a bond trader at a very big boutique firm for over 17 years, and never have I seen credit spreads like this.

    If I were a betting man, which I am, I would bet that Congress will have no choice but to approve this bailout in some new form. The lawmakers will tack on some new provisions to make people happy, but in the end, the Treasury has to step in. We are hearing that a new vote will come up on Thursday.

    The politicians will put up a show, pretending like it’s a tough decision for them to make, but ultimately they will cave in. The pressure from the markets is like a gun to their heads. They have no choice, it’s just a matter of time.

    In the meantime, there’s no telling how the markets will move. The financial landscape is changing and with so many daily fundamental changes, the old rules do not apply.

  15. Johns Wu said:
    on September 30th at 12:45 pm

    Is the consensus that the credit crunch will fix itself? Totally wrong. Take a look at the LIBOR rates today… 2% to 7% OVERNIGHT!!!!!!!!!!!!!!!! CRAZY!!!!!!!!!!

    This has absolutely nothing to do with propping up stocks and banks, it’s about defusing the credit and derivative marketplace at the institution level before this cancer spreads to small business and consumer lending.

    Once the problem spreads to “main street”, your average American Joe will be complaining why we didn’t do anything to prevent this.

    I also agree that inevitably, some form of bailout package will be passed this week. Interbank lending at these rates is unsustainable.

  16. JC said:
    on September 30th at 01:50 pm

    I’m not sure what credentials you have to post such a ridiculous rant, but the fact of the matter is that the bailout would just be another market manipulation by the hand of government. Who do you want controlling our banking, the private sector or the government? I will always choose the private sector because they act in self interest, and are motivated to make what they consider the best choice for themselves. Read up a little on some more advanced economic theory, like mechanism design, before freaking out about derivative bubbles. I won’t be visiting again, to read such garbage.

    Time and time again we try to “correct” the market and all of its risk by creating artificial stimulus and look what it does! The end result is always inefficiency. Well my friends, I think we’re finally going to get a correction and is it going to hurt? Yes. Will we all be better off in the future? It depends on how YOU decide to play the game.

  17. Johns Wu said:
    on September 30th at 02:27 pm

    Yes it can be very painful, this could be the 1970s all over again:

    Inflation: 13%
    Unemployment: 13%
    Mortgage rates: 18%
    Money markets: 18%
    Gold: $800+

  18. Craig said:
    on September 30th at 04:07 pm

    Bravo, John Wu, Bravo,

    Someone needs to step out of the middle of the political rhetoric and tell everyone the emperor has no clothes.

    The reason for going forward in the bailout is not to save the fat cats, it is to prevent a second great depression. We could potentially be witnessing historic events unfold before us. What happened after the great depression? WWII anyone? Russia is willing to cross borders for economic reasons (oil). Put people in economic crisis and they take desperate measures (Germany barrels of cash for bread in late 30s).

    People need to inject some common money sense into the political speak the stupid politicians are throwing around. Our politicians are using this crisis for personal and political gain. And it is all because of this &*#$ election. And yes I think Pelosi is one of them. She either didn’t have the support to begin with and staged this, or she alienated her support by using the situation for personal and political gain. That also goes for any idiot who changed their vote for the same reason. No wonder we as a country have such a low opinion of our congress.

    This is your money and well being at stake, not some nameless fat cat like some of the politicians are throwing around. YOU own some of these securities in your 401K, YOUR ability to get a future home loan is at risk and the resale value of YOUR existing home, YOUR job could be cut if the economy goes into a depression. The securities they are buying with the bailout will have value that can be at least partially recovered, if they don’t let this go on too long. I don’t care if they publically guillotine the financial officers and hedge fund operators, add that to the bill.

    Doesn’t anyone who is criticizing John ever want to buy another home on credit, get better a better job or decent raise, not see their 401K drop like lead, or god forbid see their son or daughter in the middle of yet another war caused by economic turmoil?

  19. joe said:
    on September 30th at 04:38 pm

    The hell with the $ 700,000,000,000(more like 2.1 trillion,when all is said and done)bail-out of the super-rich,greedy,and powerfull. All the federal goverment has to do is increase the FDIC to 500,000,give each american citizen one million dollars(and save$ 699,800,000,000— just on the first 700 billion !!!! ); and just watch the economy take-off as every american citizen can afford health insurance,gas,make their mortage payment,and homeowners insurance.

  20. Eugene said:
    on September 30th at 04:45 pm

    For those of you who want analysis:

    http://globaleconomicanalysis.blogspot.com/

  21. Eugene said:
    on September 30th at 05:52 pm

    Actually, I stepped out of line; mi dispiace. Disregard the “For those of you …” comment. You should read it for yourself, and judge it yourself.

    And for those of you who haven’t read this yet and are interested in reading it:
    http://www.rgemonitor.com/roubini-monitor/253783/is_purchasing_700_billion_of_toxic_assets_the_best_way_to_recapitalize_the_financial_system_no_it_is_rather_a_disgrace_and_rip-off_benefitting_only_the_shareholders_and_unsecured_creditors_of_banks

  22. Newgrad said:
    on September 30th at 06:23 pm

    The global banking system has frozen up, but they are just BUSINESS, and I don’t think they can keep the money in the bank forever. It is just a catch!
    Everyone around the world is waiting for the rich American to “save” the world. What about the rich European and Asian? They are all “wait and see” while the Bush Administration throw $700 billion in US taxpayer money down a black hole.

  23. Craig said:
    on September 30th at 09:48 pm

    Eugene,

    Anytime I read a link or an article, I try to see what the context of the preson who is writing it is speaking from. I looked at the conferences they sponsor, and they seem to have an interest in hedge funds and venture capitalization.

    http://www.rgemonitor.com/component/option,static/inc,events/Itemid,114/

    In my opinion, it is these types of risky leveraged strategies that have caused part of the problem, and that these types of investment have a huge interest in how this issue is resolved.

    Here are some of the conferences they sponsor:

    Hedge 2008
    “The World’s Finest Hedge Fund Conference”
    Victoria Park Plaza, London
    October 23, 2008

    GAIM 2008 Fund of Funds
    The Largest gathering of Fund of Hedge Funds and their investors in the world
    Grand Hyatt, New York City
    October 28, 2008

    Gaim International Fund of Funds
    Europe’s only fund of hedge funds conference
    Intercontinental Geneva Hotel, Switzerland
    November 13, 2008

    Private Equity, Venture Capital & Institutional Investment Summit
    Private Equity, Venture Capital & Institutional Investment Summit
    Westin Hotel, Paris
    November 20, 2008

    I thought MarkPDS’s link was more informative, but the article was writtten before the congress came to a joint compromise yesterday, so I am not sure if some of the issues they brought up are addressed.

  24. Craig said:
    on September 30th at 11:52 pm

    Joe had an idea above, but he missed a few digits in his thought process. There are many more than 200 people in the US, Joe. 200 million people, each given 1 million dollars, doesn’t add up to 200 million but to 200 trillion (a few dollars more than the current crisis entails, no?).

  25. joe said:
    on October 1st at 03:47 pm

    CRAIG,YOU ARE RIGHT. I WAS THINK…200,000,000 US CITIZENS X 1 MILLION DOLLARS !!!! WHICH SHOULD OF COURSE BE : 200,000,000 US CITIZENS X $1,000,000 = $ 200,000,000,000,000 ( 200 TRILLION) IT JUST GOES TO SHOW HOW LARGE THE NUMBERS ARE;THAT ITS HARD TO EVEN GET YOUR MIND AROUND HOW MUCH MONEY WE ARE TALKING ABOUT !!!!!

  26. You may be right, but... said:
    on October 1st at 08:53 pm

    Um, why is Nancy Pelosi “a hippie”…? Sounds like you’re the one mixing politics and economics.

  27. Bob said:
    on October 2nd at 02:11 pm

    The people who legislated this crises are now going to come up with the solution? I doubt it. And while everyone is discussing executive compensation nobody talks about forcing the RNC and DNC to forfeit every campaign contribution from Wall Street firms, banks and financial services PACs. Nobody talks about cutting politicians compensation or benefits. Phil Gramm and the pimp he calls a wife are walking around free when they should be being water-boarded twice a day. Choose not to see what you don’t want to see…but the end is near.

  28. Johns Wu said:
    on October 2nd at 02:37 pm

    Craig,
    Thanks for the support!

  29. DOUG said:
    on October 2nd at 02:42 pm

    FOR YOU YOUNG PEOPLE WHO HAVE NEVER EXPERIENCED ANYTHING IN LIFE, BUT SCHOOL.
    I SOLD A HOME IN 1979 AT A GREAT LOSS. THEN TURNED AROUND AND BOUGHT A HOME AT %10. THIS WAS A HAVE TO SITUATION.

    ALL THE BULL ON WALL STREET, WITH GAMBLING OUR FUTURE AND FUTURE GENERATIONS OF AMERICANS. SHORT SELLING, HEDGE FUNDS, AND ALL THE OTHER GET RICH PLANS. HAS DESTROYED AMERICA. YOUNG PEOPLE IT WILL GET MUCH WORSE.
    EVERYONE IN WASHINGTON NEEDS TO BE PACKING THEIR BAGS, ALONG WITH WALL STREET.
    WE ONLY HAVE ONE CHANCE TO SAVE AMERICA AND THAT IS TO VOTE FOR ONE PERSON THAT LOVES AMERICA AND SERVED IT WELL. CAME BACK TO WASHINGTON TO HELP WITH THE CRISES. HE AGAIN PUT HIMSELF LAST AND AMERICA FIRST.
    WAKE UP AMERICA.

  30. ANDREW said:
    on October 2nd at 03:12 pm

    FOLKS, THE FLEECING OF AMERICA STARTED YEARS AGO, ITS JUST NOW BEGINNING TO SHOW ITS UGLY HEAD. GIVING FREE HOMES TO EVERYONE THAT DID NOT DESERVE A HOME, THE REST OF US IS PAYING FOR THEIR HOMES. FOR THE VERY PEOPLE THAT DON;T WORK..
    THE RANGELS, MAXINE WATERS, BARNEY FRANKS, DODD THE DE-O-CRATES.
    I HAVE NEIGHBORS THAT GOT NEW HOMES, THEY DON’T MOW THEIR LAWNS, THEY HAVE JUNK EVERYWHERE. THE NEIGHBORHOOD HAS GONE TO TRASH. NOW WHICH IS BEST FOR THE NEIGHBORHOOD. RESALE THE HOMES OR LEAVE THE TRASH WHERE IT IS,, NOW THE GOVERNMENT IS STILL PUSHING HOME SALES WITH NOTHING DOWN. I HAVE A 1930 HOME, WHICH I PAID FOR AS A SINGLE MOTHER. WORKED TWO JOBS AND WENT TO SCHOOL AT THE SAME TIME. GOVERNMENT HAS NEVER PAID BE A DIME. I HAVE BEEN UNEMPLOYED AND DID NOT DRAW FROM THE GOVERNMENT. IT USE TO BE A DISGRACE TO ALLOW THE GOVERNMENT TO KEEP YOU UP. MY GRANDFATHER WOULD NOT ACCEPT SOCAL SECURITY. HE CONSIDERED IT WEL-FARE. WE HAVE NO SHAME ANYMORE.
    IF WE HAD ALL THE BILLIONS OF DOLLARS THE WALL STREET WALKED AWAY WITH, IT WOULD JUST ABOUT PAY FOR THE BAILOUT. ADD UP JUST A FEW, START WITH FRANK RAINES, FRED AND FANNIE CEO, $90 MILLION, 162, 105,56, 44,42,24,19,16,13,9,8,22, THESE ARE MILLION DOLLARS CEO’S THAT WALKED AWAY TO THE GOLF GLUBS.
    “HOW CAN SOMEONE WHO BLOWS A BILLION DOLLARS ON A POLITICAL CAMPAIGN BE FISCALLY RESPONSIBLE”?
    NEED I SAY MORE.

  31. Roberta said:
    on October 2nd at 05:15 pm

    I don’t want them to pass the Bailout Bill…they should be ashamed of themselves, forcing taxpayers to pay for the mistakes of Wall Street. CEOs get their golden parachutes and us normal citizens have to worry about where the next dollar is coming from. Insane. If they pass this bill, they deserve not to get re-elected because the normal average everyday person does NOT WANT THIS.

  32. AverageJoe said:
    on October 3rd at 04:11 am

    I think the stock market and housing prices are still too HIGH, and there are still too many crappy bank like WaMu out there. We should just let them die instead of wasting our taxpayer money. NO BAILOUT !

  33. Ajith said:
    on October 3rd at 10:33 am

    I was a first time visitor and this post was enough to convince me not to revisit. Author is all up for not interfering with markets but is rooting for the government to put in money! That is a contradiction you cannot forgive.
    Anyway my personal view is that 700Bn will get sucked into a black hole and won’t change anything at all! Stock market will recover somewhat but the long term confidence is now shattered unless we regulate the investment banking sector somewhat. I always say that free market applies to trade able goods and commodities but NOT the banks. Because it allows them to play with money which doesn’t belong to them and F’ it up for everyone.

  34. Dan said:
    on October 3rd at 07:54 pm

    I find it interesting when people who claim to be free market advocates are only that way when the markets are showing positive results or are “working” the way they want. But there is a flip side to free markets. We’re seeing that now. A true free market thinker will advocate that the markets do what they will do and those caught on the short side suffer the consequences. The argument that the bailout is a necessary evil, just doesn’t hold water if you feel capitalism and the free market system is the best one. Let the chips fall where they may. The market will work itself out and the country will emerge stronger than ever. But now, we just put an expensive bandaid on a wound that will not be healed by applying a bandaid. We’re going to regret this bailout. Big time.

  35. James said:
    on October 9th at 09:06 pm

    Look at what happened to the market AFTER this so called bailout passed It crashed even further. Companies come and go. Profits are made and lost. This is the free market. It is not the role of the government to decide who wins and loses and by how much. The bailout will be funded by selling Treasury Bonds and increasing the national debt — basically borrowing from the future. This will increase foreign holdings of our debt as well as increase interest payments. The estimate on interest payments is $35 billion per year in additional interest payments. Folks, the US Government does not have $700 Billion. The party is eventually going to be over as the dollar is devalued and our country becomes a 2nd or 3rd rate power. Big trouble is ahead for our children.

  36. Anitra Gordon said:
    on October 13th at 08:02 pm

    Paulsen did not have the best idea. Gordon Brown of England has the policy now seconded by Nobel Economics winner Krugman. Finally, Paulsen has changed the plan so it resembles the British plan. He originally offered a 3 page document…What an insult. Read Krugman’s NY Times column today, you can get it online.

  37. Frank Cerasuolo,MD said:
    on October 16th at 02:38 am

    While it is true that profit is “privatized” and debt is “socialized” the bailout is another example of corporate welfare.
    If one insists on referring to it as socialism then it is socialism for the wealthy who took the money and had a party.

  38. Frank Cerasuolo,MD said:
    on October 16th at 02:48 am

    Because profit is “privatized” and debt is “socialized” the bailout is really corporate welfare.
    It can be more accurately seen as socialism for the wealthy who will put it in their pockets and throw a party.

  39. Marc said:
    on October 19th at 06:35 pm

    Thank you, Johns Wu, for providing us with a perfect example of the insane, screeching, short-sighted rhetoric full of lies and convenient half-truths that spew out of the mouths of conservatives when they are pretending to be apolitical. Let’s review, shall we? In Act 1, a terrible plan reaches Congress that economists almost universally despise. In Act 2, Congress rejects said plan. In Act 3, some loopy dude writes about Armageddon on his blog and does the whole Chicken Little thing. Then in Act 4 (a few days later), Congress passes a plan that many economists like a lot better than the first one. Perhaps Act 5 will consist of the aforementioned loopy dude realizing that someone DID screw up in this tale, but it wasn’t Congress. Or maybe you think those days made all the difference?

  40. how said:
    on October 24th at 07:34 pm

    www fakepaycheckstub com Need Proof of Income? Make Fake Pay Check Stubs Here! Create Free Sample Paycheck Stub Template

  41. Jane Yo said:
    on November 13th at 10:48 pm

    Johns Wu playing the political blame game? Try sticking to $$$ and not politics. Or you might lose this reader.

  42. Debbie said:
    on December 28th at 06:07 am

    Hah> This is not a made up comment.