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View Full Version : U.S. Issues An Economic Plan That Doesn't Cost $700 BILLION


The Rick
09-25-2008, 10:12 AM
This makes sense to me, but I've always been a Dave Ramsey fan anyway.

How We Can Clean Up A Lot of the Economic Problems

Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.

Then we got all mad and made all these new laws that are coming out the wazoo called sarbanes oxley. It's a huge, massive law but the idea is that we were going to mandate ethics to corporate America because apparently they didn't have any, according to the Enron failure. It's now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it does make each company each day restate what their assets are worth if sold on the market. This accounting procedure is mark to market accounting--you need to remember that. It's a good concept and keeps companies from having loaded balance sheets.

How This Affects Us Today

However, it's part of what's caused this in the news now. Merrill Lynch was sitting with $30 billion tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I'm with you on that. Those houses didn't become worthless all of a sudden because those people couldn't sell their bonds. Since they couldn't sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn't, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They're junk bonds. But at 22 cents on the dollar, it's a bargain because even if you foreclosed on every one of the houses in there, you'd probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there's no market for them. That's where these companies are stuck. They can't sell this stuff, but accounting-wise, they've had to mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't force them to mark down to market value and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule -- a temporary change -- that'll free the market up. It's seized right now; it's frozen. This will thaw it out and get it going again. He says that'll solve 60% of the problem ... and I think he's right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what's driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper?

I'd rather them work their own crap out than change the accounting rule.

I don't like giving them any money or any help with my tax dollars. But I'd rather see that than see the whole thing turn completely upside down in a fruit basket turnover than have a whole meltdown or something and freak out here in the middle of the election season. Why don't we just take the FHA insurance program and extend it across these sub-primes? What that means is that you and I are guaranteeing the lender that they're not going to lose as much or any money on those mortgages. Now I don't like guaranteeing them, but I like it better than buying them. In other words, instead of $700 billion in tax-payer debt going out there to bail out these companies, just extend the insurance out. You could probably do that for less than $40 billion. It's like a 95% savings!

If the government insured those mortgages, they would then be marketable. And could sell them. And the companies would stay afloat. And we, the people, don't have to get into the mortgage business. Now we're going to get in there a little bit because of the insurance on those getting foreclosed on. But foreclosures aren't causing this. This is being caused because these companies are frozen and seized up. We've got to let some of the steam come off and put some oil in there to get this thing moving again. We can do that without going into debt $700 billion.

Here's Your Plan

Call your Congressman. Call your Senator. Tell them to change the mark-to-market accounting law and to extend insurance but extend no loans. If they extend loans - if they borrow the money on the national debt in order for us to all go into the mortgage business a trillion dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in Washington, but it's not something you're going to see on TV. If you'll let your Congressmen know you know about this and that you'll vote against them if they don't vote to change the mark-to-market law and you'll contribute your money to make sure they never serve in office again. That's what you need to tell them early and often (http://banking.senate.gov/public/index.cfm?FuseAction=Contact.Form).

If you're pissed, this is the time to step up and do something about it, America! You can stop this! It's being railroaded down your throat, but you can stop them if you call them in mass starting now. READY ... SET ... GO!http://www.daveramsey.com/etc/fed_bailout/economic_cleanup_10887.htmlc

ROYC75
09-25-2008, 10:17 AM
I like his show and views as well .........

alnorth
09-25-2008, 11:03 AM
Except by this same logic, Ramsey inadvertantly makes a good argument for the plan. If his numbers are right, then in the long run this doesn't cost us $700B. It doesn't COST us anything, treasury makes a very nice profit by snapping up a lot of distressed paper below their real long-term value.

The Rick
09-25-2008, 11:09 AM
Except by this same logic, Ramsey inadvertantly makes a good argument for the plan. If his numbers are right, then in the long run this doesn't cost us $700B. It doesn't COST us anything, treasury makes a very nice profit by snapping up a lot of distressed paper below their real long-term value.
Possibly, but I'd rather our federal government stay out of the mortgage business...even if there's a profit in it.

alnorth
09-25-2008, 11:12 AM
Possibly, but I'd rather our federal government stay out of the mortgage business...even if there's a profit in it.

When we bailed out Chrysler, we eventually made a profit. When we bailed out the S&L's, the government eventually made a profit. We eventually will make out like bandits with our 80% stake in AIG.

All of those are dwarfed by our likely return from this mess. Some economists are starting to calculate that the government could literally come out ahead by trillions. To say that we shouldn't do this because our federal government should "stay out of the mortgage business" is kind of silly, especially since they have really always been in that business for most of this century anyway.

mikeboogie
09-25-2008, 11:12 AM
What do you think the treasury will do with that profit? Expand the government?

If they would cut each person who files a tax return a check, I am all in.
They could get rid of the capitol gaines tax to offset the profit.

Chief Henry
09-25-2008, 11:16 AM
This makes sense to me, but I've always been a Dave Ramsey fan anyway.

http://www.daveramsey.com/etc/fed_bailout/economic_cleanup_10887.htmlc

It use to be that way = market to market value. Sadly it was changed.

Another idea would be to suspend all capital gains tax's for 2-5 years.
Let people WANT to invest in the USA.

alnorth
09-25-2008, 11:26 AM
What do you think the treasury will do with that profit? Expand the government?

If they would cut each person who files a tax return a check, I am all in.
They could get rid of the capitol gaines tax to offset the profit.

I have no idea, but its not quite a done deal yet. At the absolute worst, we may get our money back with very little return, but there's plenty of upside.

Our $700B isn't going to buy $700B of face value. Given what we've done to AIG and the tough talk going on now, the government is probably going to drive a very hard bargain and force these companies to sell their bad paper for 30, 20, maybe even 15 cents on the dollar in a few really bad cases. These companies in trouble are desperate for cash now and dont have the staying power to hold on to them to get their full value out.

Our $700B could possibly buy many trillions (face value) worth of mortgages. Obviously they wont all pay off at face value or we wouldn't be in this mess, but even if every homeowner tossed the keys on the desk we'd probably get our money back from the foreclosures. More than likely they WONT all go bad, maybe half of them keep paying their mortgages.

The government gets to cheat as well, setting interest rates and having direct access to all the necessary levers to increase the value of their investments. On top of all that we are talking about getting preferred shares out of all these banks to sell later when they recover, which is just gravy.

Some congress/president could really get a windfall someday soon.

The Rick
09-25-2008, 01:09 PM
Some congress/president could really get a windfall someday soon.
For me personally, that just goes against the principles of what government should be about. As good as it sounds, it's a slippery slope in my opinion.

Nightfyre
09-25-2008, 01:11 PM
Except by this same logic, Ramsey inadvertantly makes a good argument for the plan. If his numbers are right, then in the long run this doesn't cost us $700B. It doesn't COST us anything, treasury makes a very nice profit by snapping up a lot of distressed paper below their real long-term value.

HOORAY! OUR GOVERNMENT CAN BE AN INVESTMENT ENTITY!!!11!!! I can't believe how unprincipled republicans are. It makes me sick.

SBK
09-25-2008, 01:22 PM
HOORAY! OUR GOVERNMENT CAN BE AN INVESTMENT ENTITY!!!11!!! I can't believe how unprincipled republicans are. It makes me sick.

Don't paint with that broad of a brush. I'm a republican and this makes me sick.

The Rick
09-25-2008, 01:42 PM
Don't paint with that broad of a brush. I'm a republican and this makes me sick.
Exactly. I consider myself a Republican too. In my opinion, a true Republican should realize that this goes against the very core of what the party is all about (smaller government, etc.).

In addition, although I've never heard him say it, you've got to believe that Dave Ramsey identifies more with the Republicans based on his various opinions on taxes, etc. He's obviously sick about this too.

Silock
09-25-2008, 01:49 PM
Someone explain to me where this $700 billion is coming from. The gov't doesn't just have that lying around, and I understand that taxes will eventually pay for it... but where is it coming from to begin with?

J Diddy
09-25-2008, 01:50 PM
Someone explain to me where this $700 billion is coming from. The gov't doesn't just have that lying around, and I understand that taxes will eventually pay for it... but where is it coming from to begin with?

start the presses

Ari Chi3fs
09-25-2008, 01:54 PM
$100 bills cost about $0.02 cents to make. Pretty good deal, if you ask me.

Silock
09-25-2008, 01:55 PM
start the presses

That's what I'm saying, but some economists are saying that this won't affect inflation. I'm assuming they're not total idiots, so I'm trying to figure out HOW that's possible. Maybe they ARE idiots.

Ari Chi3fs
09-25-2008, 01:56 PM
ITs actually gone up, I see... up to 4 cents per bill, regardless of denomination.

Hydrae
09-25-2008, 04:40 PM
ITs actually gone up, I see... up to 4 cents per bill, regardless of denomination.

Damned inflation!

alnorth
09-25-2008, 04:51 PM
HOORAY! OUR GOVERNMENT CAN BE AN INVESTMENT ENTITY!!!11!!! I can't believe how unprincipled republicans are. It makes me sick.

Investment is not the PURPOSE of this bill, and you damned well know it. They are doing this because it is absolutely necessary. All I was saying is that those people who claim this will COST us $700B (as in we lose $700B) are flat-out wrong. We will likely even profit from it, but thats just a secondary benefit.

***SPRAYER
09-25-2008, 05:45 PM
Here's my plan:

1. No income tax for at least one year. Everybody who works for the government can take the year off (they don't do shit anyway).

2. Kill everybody in prison, and fire all the prison guards (or kill them too).

Thats just for starters.

WilliamTheIrish
09-25-2008, 05:48 PM
Just don't kill the Irish.

Nightfyre
09-25-2008, 05:52 PM
Investment is not the PURPOSE of this bill, and you damned well know it. They are doing this because it is absolutely necessary. All I was saying is that those people who claim this will COST us $700B (as in we lose $700B) are flat-out wrong. We will likely even profit from it, but thats just a secondary benefit.

If it was so likely to yield profit at little inherent risk, investors would have bought it up by now. It is NOT the role of the government to bailout stupid institutions. Let them fail and liquidate their shitty assets.

alnorth
09-25-2008, 06:00 PM
If it was so likely to yield profit at little inherent risk, investors would have bought it up by now. It is NOT the role of the government to bailout stupid institutions. Let them fail and liquidate their shitty assets.

Who?!? $700B cash money available right now? Must hold for several years?

I'm sorry, but I'm going to trust my own knowledge and the world's financial experts over your opinion. If this deal falls through you are going to look back at this many years from now and think "well damn, I was wrong!"

WilliamTheIrish
09-25-2008, 06:08 PM
Who?!? $700B cash money available right now? Must hold for several years?

I'm sorry, but I'm going to trust my own knowledge and the world's financial experts over your opinion. If this deal falls through you are going to look back at this many years from now and think "well damn, I was wrong!"

al, I firmly believe that this is a mistake. I don't want to see mass suffering, but I believe that not bailing these fools out is the right thing to do. Regardless of the consequences.

Friendo
09-25-2008, 06:11 PM
how about this one:

Hi Everyone,
I'm against the $85,000,000,000 bailout of AIG. Instead, I'm in favor of giving the $85,000,000,000 to America in a ""We Deserve It Dividend"".
To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.
So divide 200 million adults 18+ into $85 billon; that equals $425,000.
My plan is to give $425,000 to every person 18+ as a "We Deserve It Dividend".
Of course, it would NOT be tax free.
So let's assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500 in their pocket.
A husband and wife has $595,000.
What would you do with $297,500 to $595,000 in your family?
>>
>> * Pay off your mortgage - housing crisis solved.
>> * Repay college loans - what a great boost to new grads
>> * Put away money for college - it'll be there
>> * Save in a bank - create money to loan to entrepreneurs.
>> * Buy a new car - create jobs
>> * Invest in the market - capital drives growth
>> * Pay for your parent's medical insurance - health care improves
>> * Enable Deadbeat Dads to come clean - or else
>>
>> Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
>> If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ("vote buy") economic incentive that is being proposed by one of our candidates for President.
>> If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!
>> As for AIG - liquidate it.
>> Sell off its parts.
>> Let American General go back to being American General.
>> Sell off the real estate.
>> Let the private sector bargain hunters cut it up and clean it up.
>> Here's my rationale. We deserve it and AIG doesn't.
>> Sure it's a crazy idea that can "never work."
>> But can you imagine the Coast-To-Coast Block Party!
>> How do you spell Economic Boom?
>> I trust my fellow adult Americans to know how to use the $85 Billion "We Deserve It Dividend" more than I do the geniuses at AIG or in Washington DC.
>> And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
>> Ahhh...I feel so much better getting that off my chest.
>> Kindest personal regards,
>> A Creative Guy & Citizen of the Republic.
>>
>>
>> PS: Feel free to pass this along to your pals as it's good for a laugh

Nightfyre
09-25-2008, 06:11 PM
Who?!? $700B cash money available right now? Must hold for several years?

I'm sorry, but I'm going to trust my own knowledge and the world's financial experts over your opinion. If this deal falls through you are going to look back at this many years from now and think "well damn, I was wrong!"

A) It is a complete fallacy to think you have to hold the security for several years. It's also a complete fallacy to assume that ONE investor has to buy it. And if you think that people don't have the resources to buy this shit up, you are kidding yourself.

B) Obviously the MARKET doesn't think these investments are worth $700B or a multitude of investors would be buying it up right now. So why should the FEDERAL ****ING GOVERNMENT be buying up these company's MISTAKES at the expense of the tax payer?

***SPRAYER
09-25-2008, 06:20 PM
al, I firmly believe that this is a mistake. I don't want to see mass suffering, but I believe that not bailing these fools out is the right thing to do. Regardless of the consequences.

I'm with you.

Where is it written that Americans are entitled not to suffer? We've become a bunch of pampered sissies.

***SPRAYER
09-25-2008, 06:21 PM
So why should the FEDERAL ****ING GOVERNMENT be buying up these company's MISTAKES at the expense of the tax payer?


Well, in fairness...

It was the federal government that encouraged all the NINJA loans.

Nightfyre
09-25-2008, 06:42 PM
So divide 200 million adults 18+ into $85 billon; that equals $425,000.

That is some epic fail at math.

Friendo
09-25-2008, 07:31 PM
That is some epic fail at math.

maybe you'll like these better...

When does a person decide to become an accountant?
When he realizes he doesn't have the charisma to succeed as an undertaker.


What's the difference between the male sperm and an accountant?
The sperm has a 1 in 250,000 chance of becoming human.

The accountant's prayer:
Lord, help me be more relaxed about insignificant details, starting tomorrow at 10.53:16 am, Eastern Daylight Saving Time.

Nightfyre
09-25-2008, 07:35 PM
maybe you'll like these better...

When does a person decide to become an accountant?
When he realizes he doesn't have the charisma to succeed as an undertaker.


What's the difference between the male sperm and an accountant?
The sperm has a 1 in 250,000 chance of becoming human.

The accountant's prayer:
Lord, help me be more relaxed about insignificant details, starting tomorrow at 10.53:16 am, Eastern Daylight Saving Time.

I'll assume you didn't know I had a degree in accounting, then. :p Not that I disagree with any of that insight in general

Friendo
09-25-2008, 07:37 PM
I'll assume you didn't know I had a degree in accounting, then. :p Not that I disagree with any of that insight in general

just a wild guess :) ;)

***SPRAYER
09-25-2008, 07:37 PM
Impressionism is the newspaper of the soul.

— Henri Matisse

Baconeater
09-25-2008, 07:37 PM
Here's my plan:

1. No income tax for at least one year. Everybody who works for the government can take the year off (they don't do shit anyway).

2. Kill everybody in prison, and fire all the prison guards (or kill them too).

Thats just for starters.

I'm not sure how that will fix the problem, but it sounds good to me nonetheless.

Nightfyre
09-25-2008, 07:38 PM
Impressionism is the newspaper of the soul.

Henri Matisse
ROFL

***SPRAYER
09-25-2008, 07:41 PM
I'm not sure how that will fix the problem, but it sounds good to me nonetheless.

I just put a bumper sticker on my car:

DON'T BLAME ME, I VOTED FOR CALIGULA

BucEyedPea
09-25-2008, 11:08 PM
Except by this same logic, Ramsey inadvertantly makes a good argument for the plan. If his numbers are right, then in the long run this doesn't cost us $700B. It doesn't COST us anything, treasury makes a very nice profit by snapping up a lot of distressed paper below their real long-term value.

No, it's more likely the cost could be 10x what we're being told, which is routine with govt's initial numbers.

BucEyedPea
09-25-2008, 11:10 PM
B) Obviously the MARKET doesn't think these investments are worth $700B or a multitude of investors would be buying it up right now. So why should the FEDERAL ****ING GOVERNMENT be buying up these company's MISTAKES at the expense of the tax payer?

Because govt usually wastes money on worthless things as it's not their own money. And is why the banksters need other people's money.

Excellent point btw. :clap:

BucEyedPea
09-25-2008, 11:12 PM
Who?!? $700B cash money available right now? Must hold for several years?

I'm sorry, but I'm going to trust my own knowledge and the world's financial experts over your opinion. If this deal falls through you are going to look back at this many years from now and think "well damn, I was wrong!"

The experts who led us to where we are now?
The experts who said the economy was sound?
The experts who said deficits don't matter?
The experts who didn't know this was coming?

Those experts?

They turned out wrong.
The only expert I trust is the man who warned of this 5 years ago.

patteeu
09-26-2008, 06:58 AM
What do you think the treasury will do with that profit? Expand the government?

If they would cut each person who files a tax return a check, I am all in.
They could get rid of the capitol gaines tax to offset the profit.

IMO, a better thing to do if such a profit were to develop would be to "finance" a transition to a tax code that encourages economic growth and makes our domestic businesses more competitive in the global marketplace. Ideally, this would be a transition to some kind of flat tax (e.g. the FAIR tax), but it could also be a less ambitious reduction of corporate tax rates and the elimination of taxes on capital gains and dividends.

BucEyedPea
09-26-2008, 07:03 AM
BTW, Al North, those experts you'rr listening to, are the ones that have the most to lose because their the billionaires/millionaires who make thier money by managing other people's money. Those are the real losers with no bailout. Follow the money.

Ain't the Progressive-era grand?