If they wanted to really create a better market, they government could have paid off all of the "bad assets" and still not spent as much money as they did.
Think about it: pay off all the bad loans given out during the sub-prime era, and if they company still would have failed, that had nothing to do with the loans and, therefore, they weren't doing business right.*
I'm still of the opinion that the market should have been free of government meddling.
*Someone who's an business economics expert might look at that and say, "wow, that's a rather ignorant and simplified way to look at the sub-prime crisis. That wasn't everything. The sub-prime loans gave false numbers and volume and book traffic, which inflated investments and borrowing against those guarantees."
Bla bla bla. To think that would miss the point. Other banks, who did business well, suffered from other banks' stupid practices. I'll put it similar to the way KidRock put it: the fault lies in both the people who got the loan, and the bank for giving it.
But, really, the better bailout would have been bailing out the people with the crappy loans.
Yeah. I can agree with regulation. Not stifling regulation. And the regulation should be organic but not too ambiguous that Corps. get away with circumventing the system under the guise of legality.
CIT is the #1 loan corporation for small businesses in America. Something has to be done or unemployment will skyrocket.
I want trustbusting, not a bailout. The price tag will probably initially be the same but at least all the money gets paid back fairly quickly.
An ideal guide to trust busting and enforcing the Sherman Anti-Trust Act as an alternative to Lemon Socialism (bailouts) when large corporations and banks fail.
1. The government seizes the business or bank.
2. The government freezes the bank accounts of all company executives and authorizes the use of deadly force if any executive is spotted within 500 feet of an airport, seaport, or the border.
3. The government breaks up the company or bank logically and runs the resulting banks or companies for 2 years, hiring back additional staff as needed and publicly trading company stock via savings bonds.
4. After no more than 3 years, the companies are auctioned off to private investors who sign an agreement that the companies will not be publicly traded for 5 years and that the business may not expand or outsource at the expense of American jobs or sell the company to a foreign investor.
5. Proceeds of auction sales are used to pay back investors in the original company or bank and recoup government costs from the trust bust.
6. Any post-auction outstanding costs are made up from the personal bank accounts of company executives.
That is the spirit of the Sherman Anti-Trust Act. Being "too big to fail" is actually a crime.
That's how REAL Republicans, Lincoln/Roosevelt Republicans treat businesses. You know, before the party got completely corrupted by big banking and big business in the teens and twenties and then by the Silver Shirts and Nazi front groups in the 30's and the Christian Right in the 50's and 80's.
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Last edited by Darth Jello on Nov 2nd, 2009 at 06:40 AM
If people are going to post threads like this, could they please try to accompany them with facts so that people don't get the wrong end of the sitck? All this is encouraging ignorance.
The Government put 2.3 billion into the group last year as part of an asset relief programme, so any talk about the timing of any bailouts is not relevant. In any case, it will make the money back (unless dumb counsel prevails and it is allowed to fail). The remaining three billion was raised privately.
This idea that companies are failing is entirely their fault due to their dumb loans is another oft-quoted myth that needs squashing. The bad loans mean little except to the companies that folded imemdiately. CIT is in trouble because it cannot raise capital, which is the knock-on effect of the sub-prime loans that has caused most of the troubles since. That is beyond the control of such companies. Sub-prime lending was the CAUSE of the crisis; it is not the actual crisis. And it is very hard to blame companies for failing due to that reason because our entire economy was based around the idea of available credit.
I am changing the name of the thread to make it less misleading. Kidrock, post serious topics with more care in future. A single line opener like that is not acceptable.
This bankruptcy deal, which has nothing to do with Government intervention, will allow the group to keep operating. As DJ said, this is essential as the group is a vital link in the issuing of small business loans, which are desperately needed at this point in tine.
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Last edited by Ushgarak on Nov 2nd, 2009 at 08:38 AM
I never said it was essential and noted that trust busting was a better idea but bailing this business out IS actually far more legitimate than bailing out the rest of Wall Street. I'd still want this CIT busted and broken up like every other major bank and corporation so this doesn't happen again.
__________________ Land of the free, home of the brave...
Do you think we will ever be saved?
In this land of dreams find myself sober...
Wonder when will it'll all be over...
Living in a void when the void grows colder...
Wonder when it'll all be over?
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And lemme guess they get a bailout too? mmm, didn't AIG get a bailout... that turned out well didn't it? So do local business get bailouts to, or just corporations?
Being sarcastic of course, everythings so ****ing corrupt.
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They got a bailout because they were afraid of failing and are now filing for bankruptcy protection so they don't have to pay any of the 2.3 billion they got back.
Thom Hartmann today pointed out the bullshit that banks can get away with absolutely raping the public coffers and investors and then declaring bankruptcy and yet normal citizens can't even make a student loan go away using bankruptcy.
__________________ Land of the free, home of the brave...
Do you think we will ever be saved?
In this land of dreams find myself sober...
Wonder when will it'll all be over...
Living in a void when the void grows colder...
Wonder when it'll all be over?
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Part of the problem was also the Fed rate creating too much artificial excess. This lent (no pun intended) itself to the seedy practices of sub-prime loans and other risky lending practices. Those lending practices lead to too much bad debt, which was hidden in the guise of the "artificial excess" created. With this was the loss of "where is it" on the mortgage backed securities. (I say this as if it is fact. It is really a theory with evidence, but I don't know if it can be proven as pure fact.)
Here's what happened: When the market became saturated with the cycle of foreclosure and resell, it busted. No longer could the banks count on these sub-primes loans being recouped through a resell at a higher amount. (The value of the homes kept going up and up as the "buyers" were nicely available.) All of this bad debt started adding up. With the loss of the "recoup at a larger amount" falling, but the foreclosures still piling up, we hit the financial crisis in 2008 as more and more balance sheets kept coming up with too much poisonous debt. (That's where the loss of confidence, shareholders bailing out of their shares, etc. came from.)
So, with the loss of "available buyers", homes stayed on the market longer and their value actually went down, making the debt even worse. Loss of confidence in internal lending was inevitable. It really does come down to sub-prime loans being the culprit of the loss of confidence.
If most of the bad debt could have been erased, almost instantly, as I suggested, then the companies still left to fall, should have fallen, and the market's confidence could have returned much faster as there isn't the looming ambiguity of potential failure. In other words, the market would be allowed to self-right at a faster past and not have to wait months on end to see how things would go. They fail, we move on. (The didn't want some to fail due to how closely tied in with the global financial picture they were. Back to the mortgaged back-securities and the "WHERE IS IT?!?!!" trail.)
It'd get over with much faster and the bad debt. This is where the bailout comes in. Instead of bailing out the people with bad-loans, the government bailed out the companies (as some of the bad-loans were solely the responsibility of the banks as the loan recipient had already foreclosed.) Sure, my way wouldn't have pushed as much money into the lender's hands, however, it would give lots of buying power to almost a million idiots who had sub-prime loans, would have saved hundreds of thousands of foreclosures, and would have almost instantly restored confidence back into the financial system as people began spending their excess (causing a cascading effect.)
However, that's not everything.
The way the system was setup, to begin with, is not right. Americans (and other nations closely tied to the American financial institutions) should save a whole lot more money than they do. The current system is a debt system. We need to get away from such a heavy debt based system. Sure, debt is fine. But not the way Americans had it. The economy retracted and people started to save more. lol...that's how it should have been in the first place. We should build the economy back up from a "less debt, more savings" type of system. That won't happen because everyone wants to live the American Dream without having the money to do so.
BUT!
And this goes back to what DJ was saying...
If there were regulations in place that would have prevented the ability to lend any or beyond a certain point of sub-prime loans, this problem may have been averted. I heard a pessimistic econimist say that the problem would have occured, anyway, in some other form, even if the sub-prime loans were limited or not allowed. I don't know if I buy into that. I'm trying to think of ways that could have caused a similar problem.......but it's coming back to the securitization problem as I think about it, which would really hinge on...you got it, loans.
We should just enforce rules and keep a top marginal income and capital gains tax above 50%, have a more robust civil service program, and create government and non-profit jobs based on demand in the labor market (doing something similar would fix illegal immigration, but that's a subject for another thread) in order to keep demand high and therefore keep wages high and competitive. Then we won't have recessions, or depressions, or a cyclical economy. Just a steadily growing economy.
__________________ Land of the free, home of the brave...
Do you think we will ever be saved?
In this land of dreams find myself sober...
Wonder when will it'll all be over...
Living in a void when the void grows colder...
Wonder when it'll all be over?
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Interesting. I did not know what "good" numbers are actually good. A capital gains tax of 50% seems steep, though. That's 2.5 times the amount it currently is. What is your logic and reasoning behind that? How would that lend to stabalization? Why that exact number and not, say, 30% or even 10%?
I'm generally not about taxes, corporate or otherwise. I know they are necessary, but as little as possible. I'm also about small to mid-sized government run ultra-efficiently. Not the gargantuan-mega-sized inefficient setup we have now.
But, yes, I would like to have seen the SEC have better regulatory practices. From what I hear, they already had the proper rules in place to catch a lot of these problems, but they simply didn't execute. An impotent SEC?
According to the increasingly validated Indian School of Economics, any economy with an upper income and/or capital gains tax below 50% is inherently unstable.
__________________ Land of the free, home of the brave...
Do you think we will ever be saved?
In this land of dreams find myself sober...
Wonder when will it'll all be over...
Living in a void when the void grows colder...
Wonder when it'll all be over?
Will you be laughing when it's over?
He's predicted most of the major economic and political developments of the last decade with fairly good accuracy. He was often off because of developments in technology and policy that he couldn't predict (i.e. he predicted the current crisis heralding the collapse of free market capitalism to initially occur prior to the collapse of communism).
Basically the school sees the most dangerous economic indicators to be wage inequality, wealth inequality, and low taxes which and defines American economic policy since Reagan to be paradoxically socialist in nature in that government policy is geared towards redistributing wealth through regulation and subsidy from the bottom to the top.
__________________ Land of the free, home of the brave...
Do you think we will ever be saved?
In this land of dreams find myself sober...
Wonder when will it'll all be over...
Living in a void when the void grows colder...
Wonder when it'll all be over?
Will you be laughing when it's over?
There is an incorrect assignment of "socialism" to what Reagan did. What reagan did was far and away from socialism. He most certainly did not distribute wealth, evenly/equally, across the board, as socialism would dictate. Production means were not removed or given to the people, either.
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Last edited by dadudemon on Nov 4th, 2009 at 03:14 AM
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