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The 700 Billion Dollar Bailout

Unfortunately, the details are still not completely available yet, but I do have one thought. The market is currently in panic mode and a number of investment products seem to have no liquidity, in other words, no one knows how to price mortgage backed securities and so the prices are not really reflecting their true value.
I suspect that we will shortly discover that as true values are established, the taxpayer will actually come out ahead in this deal, not just from liquidity coming back into the market, but the government (and therefore the taxpayer) will see a profit in these takeovers.
Just my thoughts.

  • Anon September 26, 2008, 11:57 am


    Why should my hard earned money go toward a CEOs retirement?

    Define “execessive executive compensation” would 50mm be excessive, 40mm, 10mm?

    I had to close my business down due to the economy,, I want my executive compensation too!!!

    Why is executive compensation even being discussed?

  • JOE September 26, 2008, 1:00 pm

    Well, I think it needs to be discussed…..
    As in, “This CEO was obligated to personally sign the annual audits, per Sarbanes-Oxley. We need to have a five year look-back on his compensation and retrieve 100% of the money he was paid. These CEOs were part of the problem, having either encouraged these bad practices, or being oblivious to them. They shouldn’t be allowed to keep that compensation when their actions were so egregious.”
    That more like what you were thinking?

  • Augustine September 26, 2008, 3:55 pm

    Since when does the taxpayer see any return on government profits? Since not even Barnanke knows the cost nor the benefit of this $700B bail out, how can you suppose to know? Then again, it’s the same Barnanke who said that after baling out AIG everything would be just dandy, so why listen to this guy and his idea of a bail out? Do I have to remind you of another $150B “bail out” towards the taxpayer earlier this year with no results to show? Bailing out is more than a wrong idea, it’s immoral to propose to help one industry at the cost of the GDP of most countries on earth.

  • JOE September 26, 2008, 4:26 pm

    Augustine – I think that the process of securitization created a situation where products were created where the quality of the underlying assets are now simply unknown. I believe we are in the opposite of the bubble mentality, we are in a state where the market doesn’t know how to price these assets at all. The government is buying these assets at pennies on the dollar, and once they sift through and separate the wheat from the chaff, the bailout will not be the loss that many fear.
    Will the money be somehow returned to the taxpayer? I doubt it. But I think the impact to the national debt will be minimal, and likely, positive. Time will tell.
    I agree with you in that I cannot ‘know’ this, I am just stating my gut feelings.

  • Dave September 27, 2008, 8:34 am

    I believe this situation is strikingly similar to the S&L crisis of the late 80s and 90s. The government ended up making money on those takeovers because they were buying assets that no one else wanted. So there is the chance that the same situation will recur with the current bailout.

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