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Post by Carlton the Barbarian on Nov 12, 2008 10:34:46 GMT -8
The govt. gave money to the airlines after the 9/11 attack, although truth was the airlines were in very poor shape even before 9/11. Since then they've come to the govt. as an ongoing thing for more money, and may also get some of the bailout pie. Once an industry counts the govt as a source of income, it can be hard to ween them off of it. I was reading up on government bailouts and Amtrak (ie the Wikipedia page). Here's an interesting section. "By 2002, it was clear that Amtrak could not achieve self-sufficiency, but Congress continued to authorize funding and released Amtrak from the requirement. Amtrak's leader at the time, David L. Gunn, was polite but direct in response to congressional criticism. In a departure from his predecessors' promises to make Amtrak self-sufficient in the short term, Gunn argued that no form of passenger transportation in the United States is self-sufficient as the economy is currently structured.[41] Highways, airports, and air traffic control all require large government expenditures to build and operate, coming from the Highway Trust Fund and Aviation Trust Fund paid for by user fees, highway fuel and road taxes, and, in the case of the General Fund, by people who own cars and do not.[42] Before a congressional hearing, Gunn answered a demand by leading Amtrak critic Arizona Senator John McCain to eliminate all operating subsidies by asking the Senator if he would also demand the same of the commuter airlines, upon whom the citizens of Arizona are dependent. McCain, usually not at a loss for words when debating Amtrak funding, did not reply." en.wikipedia.org/wiki/AmtrakWith regards to the airline industries, haven't most of them already filed for bankruptcy after the airlines were deregulated?
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Post by Brendan Anderson on Nov 12, 2008 15:42:41 GMT -8
Carlton, I think there's quite a bit of difference between transportation services like amtrak and the airlines vs. transportation products like cars and motorcycles. People own cars and motorcycles. If a car company's products don't appeal to the market, then they will go out of business because other car companies are more successful with their products. So as imperfect as a government bailout to the airline industry was, just think how much worse it would be with the auto-makers. Oh, and if anyone would like some of that $700 billion in bail-out money, here is the application...it's only 6 pages or so: www.ustreas.gov/press/releases/reports/applicationguidelines.pdfI'm thinking of starting the "Bank of Anderson" and signing up. The government money-train might not come back for a long time! -Brendan
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cheno
Conductor
Posts: 1,012
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Post by cheno on Nov 12, 2008 17:50:49 GMT -8
I would much rather they use money from the current bailout to help the auto industry than helping AIG and company.
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Post by Carlton the Barbarian on Nov 13, 2008 5:50:56 GMT -8
Carlton, I think there's quite a bit of difference between transportation services like amtrak and the airlines vs. transportation products like cars and motorcycles... So as imperfect as a government bailout to the airline industry was, just think how much worse it would be with the auto-makers. Yeah, I was just trying to gather my thoughts on government bail-outs. (When should a bailout occur? What industries, etc?) I think President Bush has done the right thing. He has given auto companies a loan and that should be it. The automakers should have to file for bankruptcy... The airlines, from what I gather, most of the major carriers have already filed for bankruptcy. It seems like they can't stay afloat without some type of government assistance. I don't think Amtrak would exist (outside of one line) if it weren't for government aid. So, I think I would support some type of bail for transportation industries, but manufacturing industries I would have to say no. -CG PS: I would support using some funds from the previous Wall Street bailout, to go towards paying pensions that the automakers had given to their workers, especially since pension agreements are no longer guranteed.
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Post by Hook on Mar 17, 2009 14:07:16 GMT -8
So, we all agreed giving no-strings-attached money to collapsing businesses is bad? Good.
I hate being right. And speaking of right, a conservative stepped up in front of the cameras and said something the likes of "President Obama just last week told us his administration knows exactly where the bailout money is going. Clearly, that is not the case". Burn.
I think matters are only getting worse, specially with the "N" word being tossed around. Not necessarily because the "N" word at times like this is bad, but because a lot of people will panic at the mere mention of it.
Oy.
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cheno
Conductor
Posts: 1,012
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Post by cheno on Mar 18, 2009 0:56:00 GMT -8
I hate being right. And speaking of right, a conservative stepped up in front of the cameras and said something the likes of "President Obama just last week told us his administration knows exactly where the bailout money is going. Clearly, that is not the case". Burn. Those conservatives. They sure know what they're doing.
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MikeP
Orchestrator
Posts: 537
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Post by MikeP on Mar 21, 2009 16:47:20 GMT -8
AIG isn't the real story anyway. It's the Fed buying U.S. debt, effectively printing 1 trillion dollars out of thin air.
Keep a close eyes on things. The chances of this working are exceedingly slim (but plausible), and if it doesn't work expect alot of inflation.
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Post by Hook on Mar 22, 2009 0:13:42 GMT -8
I hate how people pursue one entity to blame. How uber-simplified those kinds of thoughts come to be. AIG is to blame, but so is the entire banking system, the housing bubble, the entertainment media, the wars, the ill-informed who took out loans, Reaganomics, Democrats who pushed banks into giving out loans (who made out a completely fucked up system of making business out of this one political pressure to "give back" to society), and, more recently the Fed and, yes, the no hold bars approach appropriated to the bailout bill by the likes of senator Dodd. It's a complicated process, but an inevitable one. It's an issue of trust. The public is out in the field doing its part thinking the higher-ups, the ones who've made it to the top, are thinking of them and, if they're not, others will keep order. Well, boo-hoo. Stop being so trusting.
When it comes to politics (which leeches off everything):
Turn off the radio.
Turn off the TV.
Tune out others' opinions.
Form your own, read, ask questions, probe for answers, and always question yourself. It shouldn't be entirely up to you, it's not your duty, but clearly AIG execs don't care. A lot of these guys don't care. *sigh*
(Don't want to sound like a preacher here, but screw it). Quiz time. ask yourself the following questions:
10-7 years ago, did you feel the economy was doing strong? If so, why? What factors lead you to believe it so? Turns out it's 2009, you were wrong. Why? Without playing the blame game, clearly, there was something wrong with your estimations. What was it? What influences your opinions? Do you think these influence(d)(s), which not only influence you but whole populations (let's assume that) whether, on the surface, they turn out to be "right" or "wrong", by playing this guessing/ideological game change the outcome of said game? In the end, what do you understand and how certain are you that you do understand of the problems at hand?
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Post by Jockolantern on Mar 22, 2009 10:50:23 GMT -8
I hate how people pursue one entity to blame. How uber-simplified those kinds of thoughts come to be. AIG is to blame, but so is the entire banking system, the housing bubble, the entertainment media, the wars, the ill-informed who took out loans, Reaganomics, Democrats who pushed banks into giving out loans (who made out a completely fucked up system of making business out of this one political pressure to "give back" to society), and, more recently the Fed and, yes, the no hold bars approach appropriated to the bailout bill by the likes of senator Dodd. It's a complicated process, but an inevitable one. Replace Reaganomics with Bushonomics and you've got a perfect timeline of why we are where we are today. It's head-spinning stuff.
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Post by muckle dabuckle on Mar 22, 2009 18:53:12 GMT -8
The economy has a fever and the only prescription is more cowbell.
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MikeP
Orchestrator
Posts: 537
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Post by MikeP on Mar 23, 2009 8:50:04 GMT -8
Agreed, Muckle.
And Hook, I'm not sure if you were directing your comment to me, but I wasn't pointing blame at anyone. (I agree with your assessment that many entities are to blame.) I was saying that we are finally at a point where the US is buying its own debt, which is literally the last resort at avoiding a major depression.
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Post by Hook on Apr 5, 2009 16:07:06 GMT -8
Agreed, Muckle. And Hook, I'm not sure if you were directing your comment to me, but I wasn't pointing blame at anyone. (I agree with your assessment that many entities are to blame.) I was saying that we are finally at a point where the US is buying its own debt, which is literally the last resort at avoiding a major depression. Nah, it was a comment in general. However, I don't think you guys are "finally at a point" where you're buying your own debt. You've been doing that for years, it's only now that we see the effects: Replace Reaganomics with Bushonomics and you've got a perfect timeline of why we are where we are today. It's head-spinning stuff. Well, from the stuff I've been reading, this disaster had its roots in the 80s. rawstory.com/news/2008/Economist_US_collapse_driven_by_fraud_0404.htmlOk, I realize there's a couple of problems with that link. One, it directs to rawstory, which is a pos site. Two, it has tinfoil hat content in it. Three, it deals with an interview by Bill Moyers, who works at PBS, which is the most liberal network in the U.S., and viewed with an American frame of mind, that translates into socialism and therefore Satan is involved. However, even if only a fraction of it is pretty true, its funny in its own way, don't you think? The major financial collapse that happened before everyone's very own eyes and nobody knew about. Makes you doubt when people say "know" and have arguments about this "knowledge" and debates and spend time, money (lol), and effort in it, but in the end, no one really knows, do they? Must put future "I know"s in doubt, too, I guess. But it does let me down on Christopher Nolan because, according to Batman Begins, Ra's Al Ghul secret organization tried to destabilize Gotham by economic means, but Wayne Sr. helped the city too much and so they were left with no choice other than stealing a military weapon that works by making no sense. But, in real life, stealing from banks works dammit!
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Post by Hook on Apr 5, 2009 17:56:33 GMT -8
Holy ****. From the Financial Times of London:
Obama’s bank plan could rob the taxpayer
By Jeffrey Sachs
Published: March 25 2009 23:14 | Last updated: March 25 2009 23:14
The Geithner-Summers plan, officially called the public/private investment programme, is a thinly veiled attempt to transfer up to hundreds of billions of dollars of US taxpayer funds to the commercial banks, by buying toxic assets from the banks at far above their market value. It is dressed up as a market transaction but that is a fig-leaf, since the government will put in 90 per cent or more of the funds and the “price discovery” process is not genuine. It is no surprise that stock market capitalisation of the banks has risen about 50 per cent from the lows of two weeks ago. Taxpayers are the losers, even as they stand on the sidelines cheering the rise of the stock market. It is their money fuelling the rally, yet the banks are the beneficiaries.
The plan’s essence is to use government off-budget money to overpay for banks’ toxic assets, perhaps by a factor of two or more. This is done by creating a one-way bet for private-sector bidders for the toxic assets, then cynically calling it “private sector price discovery”. Consider a simple example: a toxic asset with face value of $1m pays off fully with probability of 20 per cent and pays off $200,000 with probability of 80 per cent. A risk-neutral investor would pay $360,000 for this asset.
Along comes the government and says it will finance 90 per cent of the investor’s purchase and, moreover, do so as a non-recourse loan. Non-recourse means the government’s loan is backed only by the collateral value of the toxic asset itself. If the pay-out is low, the loan is defaulted and the government ends up with the low pay-out rather than full repayment of the loan.
Now the investor is prepared to bid $714,000 (with rounding) for the same asset. The investor uses $71,000 of his/her own money and $643,000 of the government loan. If the asset pays off in full, the investor repays the loan, with a profit of $357,000. This happens 20 per cent of the time, so brings an expected profit of $71,000. The other 80 per cent of the time the investor defaults on the loan, and the government ends up with $200,000. The investor just breaks even by bidding $714,000, as we would expect in a competitive auction.
Of course, the investor has systematically overpaid by $354,000 (the bid price of $714,000 minus the market value of $360,000), reflecting the investor’s right to default on the loan in the event of a poor pay-out of the toxic asset. The overpayment equals the expected loss of the government loan. After all, 80 per cent of the time (in this example) the government loses $443,000 (the $643,000 loan minus the $200,000 repayment). The expected loss is 80 per cent of $443,000, equal to $354,000.
The idea of “private sector price discovery” is therefore flim-flam. There would be price discovery if the government’s loan had to be repaid whether or not the asset paid off in full. In that case, the investor would bid $360,000. But under the Geithner-Summers plan the loan is precisely designed to be a one-way bet, for the purpose of overpricing the toxic asset in order to bail out the bank’s shareholders at hidden cost to the taxpayers.
The banks could be saved without saving their shareholders – a better deal for taxpayers and without the moral hazard of rescuing shareholders from the banks’ bad bets. Most simply, the government could provide loans to buy the toxic assets on a recourse basis, therefore without the hidden subsidy. Alternatively, the plan could give the taxpayers an equity stake in the banks in return for cleaning their balance sheets. In cases of insolvency, the government could take over the bank, the much dreaded nationalisation, albeit temporary. At the end of the Bush administration, Congress voted for the $700bn (€517bn, £479bn) troubled asset relief programme (Tarp) on the assurance the taxpayer would get fair value for money (for example, by taking equity stakes in the rescued banks). The new plan does not offer that.
Tim Geithner, Treasury secretary, and Lawrence Summers, director of the White House national economic council, suspect that they cannot go back to Congress to fund their plan and so are raiding the Federal Reserve, the Federal Deposit Insurance Corporation and the remaining Tarp funds, hoping that there will be little public understanding and little or no congressional scrutiny. This is an inappropriate institutional use of the Fed, the FDIC and the Tarp. Mr Geithner and Mr Summers should at the very least explain the true risks of large losses by the government under their plan. Then, a properly informed Congress and public could decide whether to adopt this plan or some better alternative.
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